Halts, limit up and limit down · the COT report

Part one: the brakes

Exchanges do not let a market fall as fast as it wants to. There are two separate mechanisms, they are constantly confused with each other, and only one of them stops trading.

A price limit is a wall, not a pause

A price limit is a band around the previous session's settlement price. Inside the band, trading continues normally. At the edge, one direction is closed off: at limit down, no trade may print below that price — but trading at or above it carries on.

For equity index futures, the overnight band is a fixed percentage each way. It exists because the thin hours are exactly when a single large order can travel furthest.

A halt stops everything

During the American session, the equity markets have coordinated circuit breakers, measured against the S&P 500 cash index, and the futures follow them. In outline:

The exact thresholds, timings and exemptions are exchange rules and they change. Treat the table as the shape of the thing, and read the current version on the exchange's own site before you rely on any number in it.

What it does to your orders — the part that matters

During a halt, nothing executes. The market goes into a pre-open state where orders can be entered and cancelled but nothing matches. Then it reopens, at whatever price the reopening auction produces.

Read that twice if you use stops, because the consequence is not obvious:

A stop is an instruction to trade when a price is reached. If nothing is trading, the instruction cannot be carried out — and when it can be, the price may be far from where you set it.

This is the honest limit of every risk plan built on stop orders. It is not an argument against using them; they are the best tool available and they work on almost every day that will ever happen to you. It is an argument against believing that a stop is a guarantee of the loss you calculated in article 8.

Circuit breakers are rare. That rarity is exactly why people meet them for the first time while holding a position and reading the rules in a panic.

Part two: the COT report

The Commitment of Traders report is published weekly by the American regulator. It breaks down who is holding what: how many long and short positions are held by each type of participant in each futures market.

Notice the second row. The data is three days old when it is published, and by the time you read it on Monday it is nearly a week old. Whatever it measures, it does not measure now.

What it is genuinely for is the slow question: how is positioning building up over weeks and months, and are the large speculators unusually committed in one direction compared with their own history. That is a legitimate thing to look at on a weekly chart.

What it is not for: your Tuesday morning. Nothing in this path will ask you to use it intraday, and anyone who tells you a COT reading predicts today's session is selling something. It is in stage 1 so that you recognise the name, know its time scale, and can put it down.

That is stage 1

Thirteen articles, and not one of them was about what to trade. Here is what they were actually for.

You now know what you are holding when you hold one of these — an agreement, guaranteed by a clearing house, with an expiry date. You know what it is written on and what moves it. You know what the exchange requires, what your broker requires, and why those are different numbers. You can turn a move into money and money into a position size. You know what your data is, what it costs, and where it quietly fails. And you know the two ways the market can take the decision out of your hands.

None of that is exciting, and all of it is the ground everything else stands on. The next stage is not about the market at all: it is about you, and whether this instrument, these hours and this way of working actually fit the life you have.