Limit up / limit down — Exchange-imposed price bands that halt or restrict trading when a contract moves too far within a period.
How limit up / limit down works in prop trading
Exchanges set daily price limits and dynamic bands to contain disorderly moves. When a contract reaches a limit it either halts for a defined period or can only trade at or inside the limit price — so a market moving limit down can be impossible to sell into. Equity index futures also have overnight limits that are tighter than the cash-session circuit breakers.
For a prop account this is the scenario where a stop provides no protection. A position held into a limit move cannot be exited at the stop level, and the loss continues to count against the drawdown. Firms generally address it with a specific rule voiding or adjusting trades during limit conditions, which is why the price-limit clause is worth reading before an event with gap risk.
Key points
- Trading halts or is confined to the limit price, so exits may be impossible.
- Stops offer no protection in a limit move — there is no counterparty at your price.
- Overnight limits on index futures are tighter than daytime circuit breakers.
- Prop firms usually have a specific rule covering trades placed or held during limit conditions.
Also known as
- LULD
- exchange limits
- price limits
- circuit breaker
Frequently asked questions
What does limit down mean in futures?
The contract has fallen to the maximum decline the exchange permits for the period. Trading halts or may only occur at or above the limit price, so sellers cannot get out below it until the limit resets or the halt ends.
Can a limit move breach my prop account?
Yes. The position continues to be marked against your drawdown while you are unable to exit. This is the main reason firms require flat accounts overnight and around major scheduled events.
Limit up / limit down is described here as a plain-language educational definition. Firms, platforms, and account programs may apply different conditions or calculations. Verify the current official terms before using this definition to make an account decision.