What is a Daily Trading Limit?
How Does a Daily Trading Limit Work?
For example, let's say that a forward contract on Company XYZ has a trading limit of X. Accordingly, if the price change exceeds X during the trading day, a "locked " occurs, and trading in the contract halts.
China has a daily trading limit of 0.5% on its national, meaning that if the price changes more than 0.5% in either direction during the day, the trading is halted until the next day.
Why Does a Daily Trading Limit Matter?
Daily trading limits prevent extreme volatility or price manipulation in the markets. If trading approaches the upper level of daily trading limit, we say that the security had an "up limit" day. Likewise, if trading approaches the lower level of the daily trading limit, we say the security had a "down limit" day.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Buying life insurance is daunting enough. No one wants to think about when they'll die and how their loved ones will continue without them -- financially and otherwise. ...Read More →
New college graduates may find themselves in a bind. They have significant student loans to pay off, but...Read More →
"Price is what you pay. Value is what you get." -- Warren Buffett Putting his finger on this difference between price and value in ...Read More →
Buckle up and hold on -- a new round of quantitative easing is here and things could start getting very ugly in the financial world over the coming months. The truth is that many...Read More →
Way back in the Summer of 2012, a person walked into a Maverik convenience store in Meridian, Idaho, and bought a Powerball lottery ticket. Powerball, as many know, is a simple $2 bet: Pick...Read More →