The Drummond Geometry Forum

L29 Sec1 Screen 23

In this lesson you talk of limit moves often. I have never heard of that jargon before. What do you mean by limit?

R.S.

In the futures markets, Exchange rules specify that price can only move so far in a given day. If prices in the real-world underlying cash markets move more than that, the price in the futures market cannot follow to the full extent on that day, and prices rise to the "limit" established by the exchange, and then stop. Generally trading is over for the day. The following day price may make another move to the new limit, and then stop again. In some volatile markets, such as markets affected by weather, or government actions, etc., there may be a series of days where there are only 30 seconds of actual trading as price instantly moves to the limit established by the exchange. When prices in the futures markets have moved into their normal correlation with the cash prices for the underlying commodity or security, then trading resumes in a more normal manner.

Thus a "limit move" is a term then means that price has moved as far in one direction as it is permitted to move in that one day, and cannot move further.