Are there any limits on daily price movements in the MCX market?
Yes, there are limits on daily price movements in the MCX market.
MCX (Multi Commodity Exchange) is the primary commodity exchange in India. It provides a platform for trading in various commodities such as gold, silver, crude oil, natural gas, and more. It is important to note that the MCX maintains certain price limits to regulate the market and protect investors from excessive price movements. These limits are known as circuit limits.
What are circuit limits?
Circuit limits are pre-defined price bands above or below the previous day’s closing price for a commodity. They are set by the MCX to regulate price movements and to prevent manipulation of prices. Circuit limits apply to all MCX commodities, and they vary depending on the commodity’s price range.
How do circuit limits work?
When the price of a commodity hits the upper circuit limit, the trading in that commodity is halted for a specific duration. Similarly, when the price hits the lower circuit limit, the trading in that commodity is halted. Once a circuit limit is hit, trading resumes only after the specified duration has elapsed or if new circuit limits are set.
For example, consider the circuit limits for gold for a trading day:
- If the previous day’s closing price of gold was between Rs. 2,000 to Rs. 3,000 per 10 grams, the upper circuit limit would be 3% and the lower circuit limit would be 3%.
- If the previous day’s closing price of gold was between Rs. 3,000 to Rs. 4,000 per 10 grams, the upper circuit limit would be 2.5% and the lower circuit limit would be 2.5%.
- If the previous day’s closing price of gold was above Rs. 4,000 per 10 grams, the upper circuit limit would be 2% and the lower circuit limit would be 2%.
If the price of gold hits the upper circuit limit during trading for any of the above scenarios, trading in gold would be halted for the specified time. Similarly, if the price of gold hits the lower circuit limit, trading would be halted until the specified time has elapsed. These limits are set to avoid sudden and drastic price fluctuations during trading in MCX commodities.
Conclusion
In conclusion, the MCX market has circuit limits on daily price movements to ensure stability and prevent market manipulation. These limits apply to all MCX commodities and are necessary to maintain trust in the platform and protect investors from excessive price volatility. As a trader, it is important to be aware of the circuit limits to effectively manage risk and make informed trading decisions.
By Astrobulls Research Pvt Ltd