Advanced English Dialogue for Business – Daily trading limit

Listen to a Business English Dialogue About Daily trading limit

Bruce: Hey Brooklyn, do you know what a “daily trading limit” is in business and finance?

Brooklyn: Yes, I do. It’s the maximum price movement allowed for a security in a single trading day, usually implemented to prevent extreme volatility.

Bruce: Exactly. Daily trading limits are put in place by stock exchanges or regulatory authorities to maintain stability in the market and protect investors from rapid price fluctuations.

Brooklyn: How are daily trading limits determined?

Bruce: Daily trading limits are typically calculated as a percentage of the security’s previous closing price, and they vary depending on the exchange and the type of security.

Brooklyn: Are there any exceptions to daily trading limits?

Bruce: Yes, there are exceptions, such as news-driven events or market-wide volatility, where trading may be halted altogether regardless of the daily trading limit.

Brooklyn: What happens if a security hits its daily trading limit?

Bruce: If a security reaches its daily trading limit, trading in that security is usually halted for the remainder of the trading day to allow investors to digest the information and prevent panic selling or buying.

Brooklyn: How do daily trading limits impact investors?

Bruce: Daily trading limits can affect investors by limiting their ability to buy or sell a security at certain prices, potentially leading to missed opportunities or forced holds until trading resumes.

Brooklyn: Are daily trading limits the same for all securities?

Bruce: No, daily trading limits can vary depending on factors such as the security’s liquidity, market capitalization, and the exchange it’s traded on.

Brooklyn: Thanks for explaining, Bruce. Daily trading limits seem like an important mechanism for maintaining order in the market.

Bruce: You’re welcome, Brooklyn. They play a crucial role in ensuring a fair and orderly trading environment for all participants.