Daily Trading Limit

The maximum price movement in a security’s price that is allowed in any one trading session.  When daily trading limits have been reached, it is said to be a “locked market”, and trading will only be  allowed at the limit price and/or within the allowed trading range of the day or trading will close for that particular security.

Daily trading limits are most often seen in the futures and options exchanges in the US, however some countries have trading limits on stocks as well. The limits are imposed by the exchanges in order to protect against extreme volatility or manipulation within the markets. H owever, a security can successively open limit up/down causing large losses for an investor who can’t get out of the trade.