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Know Your Limits: Day Trading Limits Explained

August 3, 2011 by John Payne| Tips & Strategies

There are some pretty significant differences between the futures markets and the equities markets. The first big difference is the trading hours: the futures markets trade 23 hours a day for most markets versus an 8:30 AM (central time) open and a 3:00 PM close in the equities markets. The second difference is the ease of short selling. In futures markets, there is no need to borrow the underlying shares like you would when you sell a stock short. The third difference, and the one I will write about in this article, is the daily trading limits that are in place for futures contracts. This is a difference many don’t understand until they learn the hard way. A stock on Google could go to 0 or to infinity in one day, and the exchange will do nothing to stop it (barring certain circumstances). The futures markets, on the other hand, have pre-set limits. They are important to know as we see them hit regularly.

Limit up and limit down is the highest amount of decline or advance the price of a futures contract can move in a single trading day before trading on that contract is halted. Once a contract reaches the daily limit, the exchange will halt trading until the market price moves back within the limits*. One of the reasons behind the limits is to provide some checks and balances to the market place, especially during panic moves or days when the selling or buying dries up. These trading halts allow some breathing room and also give the market a chance to digest news events or a crisis. The limits placed on each commodity differ, based mainly on the contract size and historical volatility. The exchanges are in charge of setting these limits and can change them at their discretion pending board approval.

Another aspect to daily limits is that they expand after a one day limit move. For example, corn has a daily limit of 30 cents. If the corn market would close “limit down”, or 30 cents lower, the next day the daily limits will be 45 cents. Seldom do we see daily limits expanded for more than two days, but it has happened recently.

Each exchange sets their own limits and they range from a certain percentage move to a constant limit move. Some contracts do not have limits while some have tighter limits than others. For example, corn and wheat in Chicago have been trading at par with each other as of late, but the daily limit on wheat is 60 cents and the corn limit is 30 cents. Keep in mind, however, that these limits are eliminated on the grains after the first notice day. We saw a 70 cent move in July corn one day a few days after its first notice day. Daily price limits exist to protect the investor, make sure you are aware of the daily price limit, or the lack thereof in the contract you trade. All daily price limits are subject to change on notice by the exchange.

Price Limits for Commonly Traded Futures Contracts

  • Corn – $.30 cents
  • Wheat (All)- $.60
  • Soybeans- $.70
  • Soymeal – $20
  • Soy oil – $.025
  • Hogs – $3.00
  • Live Cattle – $3.00
  • Crude Oil – $10.00*
  • Natural Gas – $1.50*
  • Gasoline – .$.25*
  • Coffee – None
  • Cocoa – None
  • Orange Juice – $.10
  • Sugar – None
  • Currencies – None
  • Gold – None
  • Silver – None
  • Copper – None
  • Interest Rates – None
  • Lumber – $10
  • E-mini S&P 500**
  • *For NYMEX energy contracts the limits trigger a circuit breaker which will halt trading for a short period, after which limits will be expanded by the amount they are initially set.

    **Price limits for the E-mini S&P 500 futures are set at 10% down only, 20% down only, and 30% down only during the hours that coincide with the regular trading day for securities, and 5% up or down for overnight trading. These limits are coordinated with price limit policies in the primary securities markets; for example, price limits on the New York Stock Exchange. The Exchange’s price limits are reassessed quarterly rather than established at fixed levels to be more responsive to ongoing market fluctuations.

Filed Under: Tips & Strategies

About John Payne

John Payne is a Senior Futures & Options Broker and Market Strategist with Daniels Trading. He is the publisher of the grain focused newsletter called This Week in Grain, along with being a co-editor of Andy Daniels’s newsletter, Grain Analyst. He has been working as a series 3 registered broker since 2008.

John graduated from the University of Iowa with a degree in economics. After school, John embarked on a 4 year career with the United States Navy. It was during two tours in Iraq and the Persian Gulf where John realized how important commodities are to the survival of society as we know it. It was this understanding that brought about John’s curiosity in commodities. Upon his honorable discharge in 2007, John’s intense interest in the world of commodities inspired him to move to Chicago and pursue his passion in a career in the futures arena.

After a three year position with a managed futures firm specialized in livestock trading, he was given the opportunity to join the team at Daniels Trading. Being in the business and seeing how other IB’s operated, it was the integrity and straightforward approach of the Daniels management team and brokers that attracted him to make the move. Since joining Daniels, John has broadened his fundamental and technical analysis of the markets even further. John has been writing his newsletter This Week in Grain under the Daniels banner since 2011.

Working in high pressure industries like the military and capital markets, John has learned the value of preparation in times of stress. He believes that instilling within his clients the value of a good plan and a cool head for dealing with the day to day swings of commodity markets. He treats every client as a teammate, understanding that his job is to help clients achieve their goals, whatever they may be.

John is a proud supporter of the Iraq and Afghanistan Veterans of America, the Veterans of Foreign Wars and the National Corn Growers Association. When he is not working, he enjoys athletics of all kinds and spending time with his wife and their two kids.

John’s commentary is featured in the following publications:

* All Ag Radio – Sirius Channel 80
* AM 880 KRVN – Lexington, Nebraska
* RFD TV
* Wall Street Journal
* Barron’s
* China News Daily (English version)

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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