DAILY TRADING LIMIT

It is the gain or loss in a contract. This can be an option and future contracts that is only allowed in a trading day session. Limits are imposed in order to protect extreme volatility within the markets. It is said to be a locked market when a daily trading limits have been met. Trading will automatically halt any trades that breaks the threshold and the trading will be closed for the security. Trading limits are more important for the derivatives than for stocks or bonds Because of the investors that uses massive amounts of leverage in trading commodities and future contracts.