When prices decline rapidly in the futures or stock market, trading rules are put in place to restrict further price declines. This is known as a Limit Down. A limit down can be triggered by a number of factors, including economic news, rumors, and large sell orders.A limit down prevents prices from falling below a certain level within a given trading period. This limits the losses that traders can incur on their positions. It also helps to prevent panic selling and protects against manipulation by large traders who might try to push prices lower for their own benefit.While a limit down can be inconvenient for some traders, it is an important part of keeping the markets orderly and preventing excessive losses.
