Trading halts

T

Trader_Herry

What do you guys deal with the situation where the price rises/drops beyond its limit and comes to a temporary halt?

Let's say the market drops beyond its limit. When it re-opens, what will it usually happen?

Will the price keep in the same trend (ie dropping)?
If so, will it open at more or less the same price as it closes, or open at a big gap?

How would you deal with the situaiton then?

Thank you.
 
When a market "locks limit", I'm talking about futures contracts, it's not the end of the world. (1) First off, try to be stopped-out of losing positions before the limit is touched. (2) Look at where the at-the-money "synthetics" are trading to get an idea of how far the market is trading beyond the price-limit. (3) Trade those options if the futures are locked and you want to somehow initiate or offset a position. (4) Keep an eye on the quantity of unfilled futures orders that are keeping the market locked. (5) If the market settles at lock-limit, the next trading session WILL gap-open in the direction of the lock. (6) During the current session, if the market comes off of the limit in the opposite direction, you want to have stop-orders already placed one-tick away from the limit that can be quickly filled. (7) Those six things should keep you out of trouble in a market with one daily fixed limit. With stock index futures, they have multiple downside limits. Whatever you do, don't get trapped at the first limit and then freeze if the market immediately cascades down to the next limits. Get flat and wait for a reversal above a limit before re-entering the market. I hope some of that helps.
 
Quote from nazzdack:

When a market "locks limit", I'm talking about futures contracts, it's not the end of the world. (1) First off, try to be stopped-out of losing positions before the limit is touched. (2) Look at where the at-the-money "synthetics" are trading to get an idea of how far the market is trading beyond the price-limit. (3) Trade those options if the futures are locked and you want to somehow initiate or offset a position. (4) Keep an eye on the quantity of unfilled futures orders that are keeping the market locked. (5) If the market settles at lock-limit, the next trading session WILL gap-open in the direction of the lock. (6) During the current session, if the market comes off of the limit in the opposite direction, you want to have stop-orders already placed one-tick away from the limit that can be quickly filled. (7) Those six things should keep you out of trouble in a market with one daily fixed limit. With stock index futures, they have multiple downside limits. Whatever you do, don't get trapped at the first limit and then freeze if the market immediately cascades down to the next limits. Get flat and wait for a reversal above a limit before re-entering the market. I hope some of that helps.
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Thanks for your valuable advice.

As the gap is going to open in the direction of the intraday direction, I shouldn't close the position before it reaches the limit.

What does it usually do after the market limits? Keep going down or fill the gap?
 
What market(s) are you referring to exactly.

Since they are on different exchanges, I am sure they have different rules of trading.

For the Ag,Chem, Metals etc., I think they trade to their "limit" price and stay there, but if you don't/can't get out, the market can continue moving in that same direction, closing at the next "limit" price (that's how the big boys make their loot).

If you are referring to the intra-day action of the e-mini's, while they may have a limit range, I am not aware of it, and have seen them exhibit ranges of anywhere from 5 to 25 pts or more.

Best,

JJ

P.S. Like Nazz said, it's best to just use a stop to avoid this situation, but things most definitely do happen!
 
If I'm understanding you correctly........what should you do if you have a profitable position that's going to get more profitable because of the "lock"? For example: you're long soybeans, they're locked up-limit, 50-cents higher at $7.50/bushel, (purely hypothetical). During the current session, you have a sell-stop at $7.49 & 3/4. If the market comes off of the limit at all, you want to be stopped-out. When the market re-opens with a new 50-cent limit, (if you still have an open-position), you want to be cognizant of two things. First, if the market is expected to open up-limit again, get ready to put in a new sell-stop at $7.99 & 3/4 if it does. Second, if it doesn't open up limit, get out at-the-market. These gaps usually signal exhaustion and atleast a short-term reversal. If the market gets "unchanged" on the day, it means all of the day's buying momentum is gone and more selling pressure is likely because all of the eager buyers were filled at the open. I hope that helps, again.
 
Quote from nazzdack:

If I'm understanding you correctly........what should you do if you have a profitable position that's going to get more profitable because of the "lock"?
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Yes, I'm asking what I should do if I have a profitable position that go towards beyond the limit.

Should I stop-gain before the limit, or should I trade the limit gap as well?


For example: you're long soybeans, they're locked up-limit, 50-cents higher at $7.50/bushel, (purely hypothetical). During the current session, you have a sell-stop at $7.49 & 3/4. If the market comes off of the limit at all, you want to be stopped-out. When the market re-opens with a new 50-cent limit, (if you still have an open-position), you want to be cognizant of two things. First, if the market is expected to open up-limit again, get ready to put in a new sell-stop at $7.99 & 3/4 if it does. Second, if it doesn't open up limit, get out at-the-market. These gaps usually signal exhaustion and at least a short-term reversal. If the market gets "unchanged" on the day, it means all of the day's buying momentum is gone and more selling pressure is likely because all of the eager buyers were filled at the open. I hope that helps, again. [/B]
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Thanks for your advice.
Very helpful for a newbie to deal with a intraday limits.

Let me sum up what you say:
1) We should hold our position. Just let it touch the first limit.

2) Then let's see how the limit gap opens. Place the stop just below the first limit. So if the gap doesn't open fine and come down imeediately, I should get out the market as soon as possible.

3) If it gaps up well, don't expect too much there's still long way for the rise. These gaps are usually gap exhaustion and a reversal (at least short-term) is likely to be observed.

Did I get you right? :)
 
Quote from JimmyJam:

What market(s) are you referring to exactly.
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Any market you could think of.
now I am considering the following markets:
- NIKKEI
I think trading at SGX is better than in the Japanese market and CME market.

- KOSPI 200
Looks very promising.
This one has intraday limits.

- HSI
- DAX
Thin market but very volatile

- Currency futures at CME
Not sure if they are good candidates to trade?!

Commodities market:
I have no ideas which one is the most. So far I heard natural gas is very very volatile, but it is thin unfortunately.

I expect some markets which has good voliatility, good liquidity (eg 50 contracts up), the movement should tend to be smooth, and one-way (if that day is trending).

An idea?


Since they are on different exchanges, I am sure they have different rules of trading.

For the Ag,Chem, Metals etc., I think they trade to their "limit" price and stay there, but if you don't/can't get out, the market can continue moving in that same direction, closing at the next "limit" price (that's how the big boys make their loot).
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What is it about?

Let's say the limit is at $5. When the market drops down to $5, no one can place an order lower than $5. So either trade at $5 or higher, or not trade at all.

If this is what you say, what should we do when we encouter such a market? Close out? Reverse? Hold?

When will the $5 limit be lifted? Or does it hold for the whole day?

Thanks for your insights and help in advance!
 
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