What is a CME Price Limit?
A price limit is the maximum price range permitted for a futures contract in each trading session. Different actions occur when markets hit the price limit depending on the traded product. Markets may temporarily halt until price limits can be expanded, remain in a limit condition, or stop trading for the day based on regulatory rules.
You Can Find More Information on Price Limits Here:
https://www.cmegroup.com/trading/price-limits.html
Items to Remember RE: Price Limits:
- Price limits are based upon the end-of-day settlement prices and will vary based on product, time of day (day session or overnight session), and contract month.
- Limits are updated daily on the CME website (link above)
- Know your limits for the product you are trading. They are subject to change without notice. You are responsible for knowing the limits of the market you are trading.
- This risk control measure is implemented to protect your capital and the firm’s trading capital.
Commonly Asked Questions RE: the 2% limit rule:
Q: What is the most efficient way to track this information?
A: You monitor the CME website for changes in the product, manually calculate the percentage, or the easiest and most efficient way is to use the tools provided by your trading platform, i.e., the quote board.
Q: What happens if I break this rule?
A: If you break this rule during your evaluation, your account will no longer be eligible for funding. If you break this rule in a live-funded account, we will review your performance, and the loss of a live account is possible.
Q: Why is this an important consideration in my trading?
A: Price limits are enforced by the CME and the regulatory agencies. It is important as a trader because price volatility creates extreme swings in price action, and once a market is halted, prices can “re-open” aggressively higher or lower. This can mean dramatic swings in the value of your position and can ultimately lead to significant, unexpected losses.