Limit up, limit down and circuit breakers

Exchanges put brakes on how far a futures price can move in a session. The brakes exist to give the clearing house time to collect margin and to stop a cascade of forced liquidations from feeding on itself. From a trader's seat they mean something more direct: there are conditions under which you cannot get out, at any price, for minutes or hours, and your stop is a piece of paper.

Price limits on equity index futures

The index contracts have two different regimes depending on the time of day.

There is no upside limit during RTH. Overnight, a 7% up move locks just as a 7% down move does.

"Limit locked" is the state to understand. The exchange does not halt trading; it forbids trades beyond the limit price. If sellers overwhelm buyers at limit down, the bid at the limit is hit and then there are no bids. Offers pile up at the limit with nothing on the other side. A sell stop triggered in that state becomes a market order with no market. It sits until the cash market opens and price discovery resumes, which can be several percent lower than the limit.

In March 2020 the index futures hit limit down overnight on several separate nights, and the cash market's 7% circuit breaker halted trading in the first minutes of RTH four times in eight sessions. Traders who held long over those nights found out where their stop filled at 9:45 am.

Commodity limits

Commodity contracts use different mechanisms, and they vary by product family. The general shapes:

Fixed daily limits (grains and some others). A maximum move from the prior settlement, set in price units and revised periodically. If price settles at the limit, the limit expands the next day. A grain contract can be limit locked for several consecutive days in a supply shock, with no ability to exit at all for a long.

Dynamic circuit breakers (energy, metals, and many others). Rather than a hard daily ceiling, the exchange defines a percentage band around a rolling reference price. When price reaches the edge of the band a short pause (a "monitoring period" of a couple of minutes) is triggered, after which trading resumes with a new band. Price can travel a long way in a session, but in stages.

No daily limits (Treasury futures, some currencies). These can move as far as the market takes them, though extreme moves may trigger exchange velocity logic that briefly pauses matching.

These rules change; the exchange's "price limits" page for each product is the source of truth and is worth reading once for anything you hold overnight.

What this does to your risk

A limit or halt turns a stop-loss into a delayed market order. The practical consequences:

• Your maximum loss overnight is not your stop. It is at least the limit distance (7% on the indices), and it can be more once trading resumes beyond the limit. A 7% move on one ES at 5,000 is 350 points, $17,500 per contract.
• Margin calls arrive during the halt. Settlement marks positions at the limit price; if that puts you below maintenance, you are on call while unable to trade.
• Liquidation happens at the worst moment. When the market reopens beyond the limit, the broker's risk engine sends its market orders into the first seconds of price discovery along with everyone else's.

A useful ceiling for any held position is to compute the loss at the overnight limit and confirm it is survivable:

loss at limit = contracts × 7% × index level × point value

For 3 MES at 5,000: 3 × 0.07 × 5,000 × $5 = $5,250. If the account is $20,000, that is 26%. Not fatal, but it is the number the account is actually exposed to, and it should sit in the risk plan next to the planned stop.

Key idea: Limits and halts mean there are conditions when you cannot exit at any price. For any position held through a closure, compute the loss at the limit, not at the stop, and make sure the account survives it.

Two things that help

Micros. One-tenth the size means one-tenth the loss at the limit. The arithmetic in this lesson is the strongest argument for holding micros rather than full-size contracts through anything.

Options on futures (not covered in this course) can define a hard maximum loss, because a long put's worst case is its premium. That is what commercial hedgers use when they need a floor rather than a stop. It is worth knowing the tool exists even if you never use it.

Try it: Find the current price limit rules for the one product you trade on the exchange's website. Then compute the loss at the overnight limit for the position size you would consider holding through a weekend, and express it as a percentage of your account.

Recap

• Index futures have ±7% overnight limits and 7%, 13% and 20% downside halts during RTH coordinated with the cash market.
• Limit locked means no trades beyond the limit; a triggered stop waits with no counterparty.
• Grains use fixed daily limits that can lock for days; energy and metals use dynamic circuit breakers that pause briefly; Treasuries have none.
• For held positions, compute loss at the limit; on one ES at 5,000 that is $17,500.
• Micros reduce limit exposure tenfold; options on futures can define a true maximum loss.