Daily Price Limits: Stop High and Stop Low

Set in yen bands, not percentages

Japan's price limit sets how many yen a stock can move in a day based on the price band of the previous close. For example, with a close between ¥1,000 and ¥1,500, the stock can move at most ¥300 that day.

Within the same band, the higher the price, the smaller the percentage

A ¥1,000 stock rising ¥300 is +30%, but for a ¥1,499 stock it's only about +20%. Hitting the upper limit is called stop-high (sutoppu-daka); hitting the lower limit is stop-low (sutoppu-yasu).

Limit-up close: allocated pro rata

If the close is still at limit-up with far more buy orders than sell orders, proportional allocation applies: shares go to brokers in proportion first, then brokers allocate them to clients (often by lottery). Placing an order doesn't guarantee you get any.

Key takeaways

• The daily price limit is set in yen by the band the previous close falls in; for example, the ¥1,000–1,500 band is ±¥300.
• Within a band, the higher the share price, the smaller the limit as a percentage: limit-up is +30% for a ¥1,000 stock but only about +20% for a ¥1,499 stock.
• Hitting the upper limit is called stop high (sutoppu-daka) and the lower limit stop low (sutoppu-yasu); if it closes still at limit-up with far more buy orders than sell orders, shares are allocated in proportion, so getting any is down to luck.

Try it yourself

You can do these exercises in this lesson's interactive simulation:

1. Keep the previous close at ¥1,250: what are the limit-up and limit-down prices? What are they as percentages?
2. Drag the previous close to about ¥1,490: what's the limit-up price? Why is the percentage smaller?
3. Drag “News shock” to +40% and play: how many days does the price take to reach fair value?
4. In the pro-rata simulator, make buy orders 10 times sell orders and place 5 units: what's the chance of getting at least 1 unit? Draw a few times.

Quiz and explanations

1. Yesterday's close was ¥1,250 (the ¥1,000–1,500 band is ±¥300). What's today's limit-up price?

Answer: ¥1,550.1,250 + 300 = ¥1,550, and the limit-down price is 1,250 − 300 = ¥950.

2. Why do different stocks rise by different percentages when they hit limit-up?

Answer: The limit is set in yen, so the higher the price within a band, the smaller the percentage.For example, ¥1,000 and ¥1,499 are in the same band, both ±¥300, which works out to 30% and about 20%.

3. At the close the stock is stuck at limit-up with far more buy orders than sell orders. What happens to your buy order?

Answer: Shares are allocated pro rata, so you may get only part, or none at all.The shares for sale are split among buyers in proportion (brokers often use a lottery), so a buy order at limit-up may not get filled.

Terms in this lesson

• price limit (Price Limit): Some markets cap how far a stock can move in a day (±10% for most Chinese main-board stocks); hitting the cap is limit-up, hitting the floor is limit-down.
• proportional allocation (Proportional Allocation): If a stock closes still stuck at limit-up (or limit-down) with far more buy (or sell) orders than the other side, the exchange splits the shares among brokers in proportion, and brokers allocate them to clients (often by lottery), so getting any is partly luck.
• stop high / stop low (Stop High / Stop Low): In Japan, a stock that hits the day's upper price limit is at “stop high” (sutoppu-daka), and at the lower limit “stop low” (sutoppu-yasu); the limits are set in yen by the price band of the previous close.