Upper Limit Price

Definition

The Upper Limit Price (or Daily Price Limit) is the maximum price level that a stock is allowed to reach in a single trading session. * Once a stock hits this limit, trades can still occur, but no trades can take place at a price higher than this cap. * South Korea: The limit is set at +30% from the previous day's closing price.

Purpose

It acts as a safety mechanism to cool down an overheated market. * It prevents extreme volatility caused by panic buying or speculative manipulation. * It gives investors time to digest information rationally rather than reacting emotionally.

Comparison: US vs. Korea

• Korea (Price Limit System): Has a hard cap (+/- 30%). The price physically cannot go higher for the rest of the day.
• US (Circuit Breaker System): No hard cap. Instead, they use "LULD" (Limit Up-Limit Down). If a stock moves too fast (e.g., >10% in 5 mins), trading is halted (paused) for 5-10 minutes, but can resume and go even higher afterwards.

Market Terminology

• "Limit Up": The English expression for hitting the upper limit. (e.g., "The stock is limit up today.")
• "Locked Limit Up": When there are tons of buy orders at the limit price but zero sell orders, effectively locking the price at the ceiling.