What is limit up-limit down (LULD)?
In one line: Limit up-limit down is a US rule that sets a price band around each stock and pauses its trading for 5 minutes if price can't get back inside the band.
The short answer
Sometimes one stock moves wildly in seconds. LULD is the safety catch.
Each US stock gets a moving price band, above and below its recent average price. If price sits at the edge too long, trading in that stock pauses.
The market-wide version, for big drops in the whole S&P 500, is the Circuit breaker.
How the bands work
The band is a percentage around the stock's average price over the last 5 minutes. For most stocks above $3:
| Stock group | Band each side |
|---|---|
| Tier 1: S&P 500 and Russell 1000 stocks, some ETFs | 5% |
| Tier 2: most other stocks | 10% |
Cheaper stocks get wider bands, and bands are wider in the first 15 minutes after the 9:30 am ET open. The exact table is in the rule, at sec.gov.
A simple example
A Tier 1 stock has averaged $100.00 over the last 5 minutes. Its band is 5%:
- Upper band: $100 × 1.05 = $105.00
- Lower band: $100 × 0.95 = $95.00
Bad news hits. Sellers push it straight to $95.00 and the only bids are lower. Trades below $95.00 aren't allowed. If the stock stays stuck at the band for 15 seconds, trading pauses for 5 minutes. Then it reopens, often with an auction.
Why it matters
LULD protects against freak prints and runaway moves, like the ones in the flash crash of 2010. LULD came in after that day.
But a pause can trap you. During the 5 minutes you can't get out. When trading resumes, price can open far from where it stopped. Your Stop loss may fill much worse than its price. That's Slippage.
A common mistake
Thinking a stop loss guarantees your exit price. A stop becomes a market order when it's hit. If a stock is paused, or reopens with a Gap, it fills at the next available price.
Fast-moving stocks deserve smaller size. Our guide on how much to risk per trade shows how to keep any one trade small.
Questions
What does limit up mean in stocks?
The stock has hit the top of its allowed price band. If it can't trade back inside within 15 seconds, it pauses for 5 minutes.
Is limit up-limit down the same as a trading halt?
It causes a short pause, which is one kind of Trading halt. Halts can also happen for news or other reasons and can last longer.
Do futures have limit up and limit down?
Yes, but under the exchange's own rules. Futures exchanges set their own daily price limits. Check cmegroup.com for each contract.
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