What is the limit?
Movement is a limitation of the maximum increase or decrease in the trading price for the safety or derivative in the business session. This is designed to prevent price bubbles caused by speculative business activities as well as sharp decreases associated with the panic of the investor. It is determined by the exchange, which considers current market conditions and the history of the security in determining the relevant limits for determining. The basic price and definition of the "session" may depend on the stock exchange; For example, it could expand the limit of moving throughout the day of trading and set up a price at the final price of the previous day.
also known as maximum price fluctuation or price limit, which ensures that prices remain to a certain extent. For example, the exchange of commodities could decide to give the wheat limit for $ 0.50 USD (USD). If wheat is traded for $ 4.50, up to $ 4.00 or up to $ 5.00 may drop, but cannot trade Venstran's values. The limit step keeps the price stable and prevents rush witha penetration business that could artificially inflate or devalue a commodity.
After reaching the limit, traders will reach the most modern castle. Trading can stop because there is a mismatch in terms of buyers and retailers and because the price cannot go further, people can relieve the first step. In some cases, this may be desirable because it allows for security or derivative before renewal trading. The Lock limit can also create market problems that result in slow performance and day off. Politicians on the stock exchange must carefully balance the risks when they decide to move the limit.
Having a daily business limit can create some stability on the volatile market. Traders working under the limit up or down know that prices cannot exceed this particular point on Thv day; This can slow down trading and give him a chance to stabilize. In tradedYou are reopening the following session, people can move the limits to see if trading in this security or derivative is still equally robust. They avoid major losses that could be created with limits for maintaining prices under control and at reasonable borders.
Information on any principle of moving the limit is available in the book Rules of Exchange. This document passes through the principles for trading, including rules that people have to follow when participating in shops and prepare for joining the stock exchange. Some exchanges set codes of dressing and behavior standards that people must meet in order to be allowed to trade on the floor, except for legal and ethical policies to maintain functional exchange.