Limit Price Setting

Price limit setting is a common trading strategy. It refers to setting a maximum or minimum price in advance when buying and selling financial products such as stocks, futures, and foreign exchange to control the risks and benefits of the transaction. Price limit settings have the following advantages:

Price limit settings can help investors avoid losses caused by market fluctuations. For example, if an investor expects a stock to rise, but the market suddenly drops sharply, the investor can limit the loss to an acceptable range by setting a sell limit order.

Price limit settings can help investors achieve expected returns. For example, if an investor expects a stock to fall but the market suddenly experiences a sharp rise, the investor can lock in profits at a desired level by setting a limit buy order.

Price limit settings can help investors save transaction costs. For example, if investors use market orders to trade, they may buy or sell at unreasonable prices due to market supply and demand, thereby increasing transaction slippage and handling fees. And if investors use limit orders to trade, they can decide the appropriate price themselves, thereby reducing transaction costs.

Although price limit setting has many benefits, it also has some disadvantages and risks:

Limit settings may affect the fill rate of a trade. For example, if investors set a limit price that is too high or too low, they may miss the market's opportunities or be unable to close their positions in time.

Limit settings may be subject to market manipulation. For example, if someone deliberately washes or smashes the market, they may trigger investors' limit orders, causing investors losses.

Limit settings may be affected by technical glitches. For example, if the trading platform experiences a glitch or delay, an investor's limit order may not be executed or canceled in a timely manner.

Therefore, when using price limit settings, investors need to reasonably select and adjust price limit levels based on their own risk preferences, trading objectives and market environment, and pay close attention to market dynamics and trading conditions to achieve the best trading results.