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Limit Up: What it is, How it Works, Example


By
JASON FERNANDO

Updated January 07, 2022
Reviewed by
THOMAS J. CATALANO

What Is Limit Up?

Limit up is the maximum amount a price is permitted to increase during one trading day. The term is often used in relation to the commodities futures markets, where regulators seek to prevent volatility from reaching extreme levels.

Limit down, by contrast, refers to the maximum permitted decline in one trading day. Both limit up and limit down prices are examples of circuit breakers—interventions employed by exchanges to help maintain orderly trading conditions.

Understanding Limit Up

A limit up price is the maximum daily price movement permitted for a futures contract. The exchange will monitor the trading of all futures contracts and automatically halt trading in a contract if its limit up price is reached. Different futures contracts will have different price limit rules, so it is perfectly possible for some parts of the market to be halted while other trading activities continue as normal.


If a price rises above its limit up level, the exchange can either halt trading in that security or choose to raise the limit up and permit further trading.

Limit Up: What it is, How it Works, Example (investopedia.com)