Locked Market
What is a Locked Market?
A locked market, also called a daily trading limit, is the maximum gain or loss allowed on a derivative or currency in one trading day.
How Does a Locked Market Work?
Let's say a forward contract on Company XYZ stock has a trading limit of X. Accordingly, if the price change exceeds X during the trading day, a "locked market" occurs, and trading in the contract halts.
China has a daily trading limit of 0.5% on its national currency, meaning that if the price changes more than 0.5% in either direction during the day, trading is halted until the next day.
Why Does a Locked Market Matter?
Locked markets 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.
