Daily Trading Limit

You’ve seen the stock market anvil drop off a cliff in a single day, but those drops could be a lot worse if day trading limits didn't exist.

In order to reduce extreme volatility or manipulation, particularly in the options or futures markets, exchanges impose daily price limits. Once this limit has been reached, the securities can’t be traded at a higher or lower price until the next day.

Individual countries can also place day trading limits on their currency. They might set a day trading limit of 1% against the U.S. dollar, so if the price changes more than 1% up or down in a single day, trading will be halted until the next day.

Commodities such as wheat or corn could have a day trading limit of $1 per barrel. If the previous day’s price was $10, the market will be “locked,” so traders can’t sell for less than $9 or buy for more than $11 per bushel in the current season.