What is a Daily Trading Limit?
Daily trading limits are the total amount that a given market is allowed to rise or fall during the course of any trading day. A daily trading limit is usually associated with an options or commodities market. The application of this type of limit on the trading activity helps to maintain some degree of stability for the marketplace, even if external factors exist that could potentially undermine that market. Using a daily trading limit also serves as a means of measuring overall market activity during the trading period. If the trading is robust and reaches the upper level of the daily trading limit, the market is said to enjoy what is known as an up-limit day. Conversely, if the trading is somewhat stagnant and does not rise anywhere near the daily trading limit, the market is understood to have experience a down-limit day. Because the daily trading limit is in place to help maintain stability in a given market, reaching the maximum limit for the day requires immediate action. When t
