Derivatives, currencies, and commodities can be extremely volatile investments. In order to prevent this volatility from spiraling out of control, options and futures exchanges enact daily trading limits stating that a security cannot rise or fall more than a certain percent in a given trading day. If a security reaches the daily trading limit, trading on that security is suspended for the remainder of the day.
This is called limots locked market. See also: Limit up, Limit down.Limit. Limits are mandated by the exchanges on which futures contracts trade, tradlng exist trdaing order to reduce volatility in the market. The limits are imposed by the exchanges in order to protect against extreme daily trading limits commodities or manipulation within the markets. Once reached, no trading occurs on that commodity or option until the following session. also called fluctuation limit or price limit.
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