Upper Circuit Meaning & How It Works Elite Info Updated 2021

Have you ever heard of a trading halt for a certain period of moment? If you answered yes, you may have been confused as to why it happened. So, there you have it! It ‘s all because the share ‘s rate hits the upper circuit level. In this post, we’ll go through a basic understanding of Upper Circuit Meaning & how the upper circuit functions.

Circuit limit

There are measures in place from the Securities and Exchange Board in India to avoid significant price fluctuations in a short period of duration. When the rate swings above or below the limit, trading on the stock is suspended.

The price band refers to the Circuit limit in which the stock can be exchanged without being paused. Orders put outside of the price range will be denied.

The trading will be automatically suspended if the price falls or goes above to the upper/lower price range. To avoid inaccurate order positioning F&O stocks have flexible price ranges.

Upper Circuit Meaning

When a stock hit the maximum level of the Circuit limit of that stock, this is know as upper circuit in stock market. When a share price enters the upper circuit, trading is halted for a set period of duration.

However, Upper circuit limit for every stock is different starting from 2% to 30%. Whereas, The normal circuit limit is around 20% for most of the stocks.

However, Since the upper circuit is only present for a short period, trading must be done quickly. Finding sellers after a share price reaches the upper circuit can be difficult.

After Upper Circuit Meaning, Let’s Discuss how it works?

How Upper Circuit Limit Works?

Price range and circuit filters are 2 terms that are widely used in the share market. On the one side, the price range is utilized for specific shares while the circuit filter is reserved for whole indexes. As a result, indexes have circuit filters where specific shares have price ranges.

The upper circuit now represents the highest price level above which the rate does not rise. These circuit filters are placed at 5%, 10%, 15%, and 20%, respectively. When the circuit levels are triggered on either sides, trading in all sections, including F&O, is halted.

If you want to trade on the upper circuit, you must reserve your spot ahead of time. The upper circuit keeps stocks from skyrocketing and stops traders from panicking.

Originally published at https://profitmust.com on May 5, 2021.