Listen to a Business English Dialogue About Limit down
Savannah: Hi Kennedy, have you heard about “limit down” in business and finance?
Kennedy: No, what does it mean?
Savannah: Limit down refers to the maximum amount by which the price of a security or commodity futures contract can decrease in a single trading session, usually set by exchange rules to prevent extreme price volatility.
Kennedy: Oh, I see. So, it’s like a circuit breaker to prevent market crashes?
Savannah: Exactly. When a security hits its limit down level, trading may be halted temporarily to allow investors to reassess their positions and prevent panic selling.
Kennedy: Are there any specific factors that trigger a limit down?
Savannah: Limit down levels are typically triggered by predefined percentage declines in the price of the security or contract, serving as a safeguard against rapid and excessive price drops.
Kennedy: That sounds important. How often do limit down events occur?
Savannah: Limit down events are relatively rare but can happen during periods of extreme market volatility or in response to unexpected news or events.
Kennedy: Thanks for explaining, Savannah. Limit down seems like a measure to maintain stability and protect investors during turbulent market conditions.
Savannah: No problem, Kennedy. It’s a critical aspect of risk management in financial markets to ensure fair and orderly trading.