What is the "exact: logic of having circuit limits in F&O when these get relaxed when hit?

[sva31855]

The question is in title.

Looking for insightful answer--not the general one provided on Zerodha, etc.

 

[shivashakti]

So that there is a bit of a cool off and traders can digest the news flow and such extreme price action

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[TracerBullet]

One clear reason is to deal with momentary liquidity issues. Say someone with large account accidentally adds a few zeroes to qty or enters incorrect limit prices. That could lead to cascade of stop orders gets triggered into the market without a floor/ceiling.
FnO also has execution ranges to deal with illiquid books.
https://support.zerodha.com/categor...-between-execution-range-and-circuit-limit-fo

 

[sva31855]

Thanks @TracerBullet.

Another reason could be: If there is some manipulation going on, then NSE will at least have time to examine and react when circuit is hit.

 

[TracerBullet]

Thanks @TracerBullet.

Another reason could be: If there is some manipulation going on, then NSE will at least have time to examine and react when circuit is hit.

Only NSE people can say what they do and check before manually changing the circuit limits. In FnO stocks in cash market, these day we get fixed 15m of pause and then market resumes. So primary purpose is probably to allow markets to cool off. Usually, we get a spike once market resumes (which is impossible for retail to trade on).

 

[sva31855]

There is another related obs: Why did TechM not hit UC on 30th? Despite being so close (1237 vs 1240)?

Could it be because smart money did not want to create unneeded buzz around this stock?

 

[shivashakti]

There is another related obs: Why did TechM not hit UC on 30th? Despite being so close (1237 vs 1240)?

Could it be because smart money did not want to create unneeded buzz around this stock?

Don't overthink on factors beyond your control.

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[TracerBullet]

There is another related obs: Why did TechM not hit UC on 30th? Despite being so close (1237 vs 1240)?

Could it be because smart money did not want to create unneeded buzz around this stock?

Markets are open to all. If someone wants to sell near upper circuit and buyers are there, it happens. Market movements are fuzzy, not every little thing has an explanation. Maybe some people made enough profit and wanted to exit and that lead to more exits or something else ..

I dont like the smart and dumb money concept much, people are acting in different ways in different timeframes with different emotional control in that moment. This kind of thinking seems to lead to overthinking. Smart person might do the right thing and still lose. Dumb money can continue to win for some time with some luck. What is dumb for one timeframe could be smart on another timeframe.

In highly liquid stocks, it seems unlikely that a single actor or group of actors could decide where price goes - and keep it there. Atleast they have to pay the price for moving the market - they can try but might still lose. Without insider info or HFT/arbitrage, i think everyone has to play the probabilistic game.

 

[Nish]

The question is in title.

Looking for insightful answer--not the general one provided on Zerodha, etc.

Exact logic is same as that of SPEED-BREAKERS on the road - i.e. TO AVOID ACCIDENTs for SMOOTH functioning of stock exchanges !

 

[sva31855]

Markets are open to all. If someone wants to sell near upper circuit and buyers are there, it happens. Market movements are fuzzy, not every little thing has an explanation. Maybe some people made enough profit and wanted to exit and that lead to more exits or something else ..

I dont like the smart and dumb money concept much, people are acting in different ways in different timeframes with different emotional control in that moment. This kind of thinking seems to lead to overthinking. Smart person might do the right thing and still lose. Dumb money can continue to win for some time with some luck. What is dumb for one timeframe could be smart on another timeframe.

In highly liquid stocks, it seems unlikely that a single actor or group of actors could decide where price goes - and keep it there. Atleast they have to pay the price for moving the market - they can try but might still lose. Without insider info or HFT/arbitrage, i think everyone has to play the probabilistic game.

Thanks. May be when I find repeated observations that this is indeed random, then I will also conclude so.

But as of now, I am still open to the possibility that this might be non-random...