What is Price Limit
A price limit is the maximum price range permitted for a futures contract during a trading session. These limits are imposed by the CME to promote safer trading and reduce excessive volatility. When the market reaches this limit, different outcomes may occur, including temporary trading halts, continuation under limit conditions, or a complete stop in trading for the rest of the session, depending on the product and regulatory guidelines.
How Do I Find the CME Price Limit?
Price Limits are calculated based on the end-of-day settlement price and vary by product, contract month, and time of day (i.e., Overnight price Limits differ from the price Limits used during business hours)
The price Limits are updated at 4:05 PM CT after each trading session and can be found on the CME Price Limits page.
One of the most effective ways to comply with the 2% Price Limit Rule is to monitor the % Net Change for the futures contract on your trading platform’s quote board. This helps identify how close the market is to reaching the CME Price limit. If this data is not currently displayed, add the “% Net Change” column to your platform to track real-time movements.
Price Limit for Equity Products
For Equity Products such as NQ, MNQ, YM, MYM, ES and MES, the CME Price limit has been set to 7%. Traders must factor in this updated threshold when calculating the 2% restricted range.
Example Calculation
To comply with the 2% Price Limit Rule, traders must stop trading when the market price moves within 2% of the CME-set price limit.
Formula to Calculate the 2% Price Limit Range:
Upper Bound: Reference Price × (1 + 0.07 − 0.02)
Lower Bound: Reference Price × (1 − 0.07 + 0.02)
Example for Nasdaq-100 Futures (NQ)
If the CME Price limit for NQ is 18,556 and the overnight limit is 7%:
Upper Trading Limit: 18,556 × (1 + 0.07 − 0.02) = 19,483
Lower Trading Limit: 18,556 × (1 − 0.07 + 0.02) = 17,628
What This Means for Traders
If the market price reaches above 19,483 or drops below 17,628, traders must stop trading immediately. Continuing to trade within this restricted range violates risk management policies, which may lead to account penalties, trading restrictions, or suspension to maintain market integrity and prevent excessive losses.
Why Trading Within the 2% Price Limit Is Prohibited
Trading within 2% of the CME Price limit creates higher risk and potential liquidity issues, as market conditions become unstable near these thresholds. If the price approaches the limit, execution becomes unpredictable, and price gaps may lead to forced liquidations, slippage, and increased account drawdowns. To ensure responsible risk management and market stability, trading in this zone is strictly prohibited, and violations may result in a deducted profit amount, account suspension, or restrictions.