A regulatory response to a state of extreme volatility in the market whereby policymakers require all trade prices to stick to a specific range on a given day. If prices are not negotiated within the range, trade will be paused until trades get back to the specified limits. Limits are set in both directions: up or down. It a limit is reached, trading above or below the price limit is prohibited and will automatically cease. However, transaction may still be take place at the limit price but not above/ below that price for the day in which prices have moved outside the range. Usually, price limits apply to the closing price of a previous day.

Price limits are maximum daily price fluctuations.