What Is Limit Down?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Limit Down is a term used in commodities trading to refer to the maximum amount by which the price of a commodity is allowed to fall in one trading day. If the limit is hit, then the market will either close totally for the day or will not be open for trading until the price drops below that limit price.

If there is a major event affecting the price of a commodity (i.e. new discovery of significant and easily accessible oil field, clearing houses reducing margin requirements for gold etc.) then the effects of a Limit Down may mean it takes several trading days for the price of the commodity to reach its new norm due to it being more than a single 'Limit Down' price decrease.

Related Terms

Return to Finance Dictionary

Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.