Limit Down...what it means

Today with the opening of another uncertain day at the stock market the announcement raced across the news wire, Limit Down. So what does limit down mean? Well according to the definition from Investopedia:

The maximum amount by which the price of a commodity futures contract may decline in one trading day.

Basically it means that the price can only drop to a specific number, for the S&P it's 855.20, for the Dow, it's 8,224, and for the Nasdaq the number is 1,168.50. The numbers are calculated on a quarterly basis.

The news was frightening enough that spokespersons for the market were called out to let traders know that the New York Stock Exchange would be open for business today. October has been notoriously a bad month for the market in the past and this October looks to be no different. Talk of a "Black Friday" is being bandied about while investors around the world contemplate how bad it's going to be.

The savvy investor realizes that you need to be in the market for the long haul. While listening to a talk show the other night I heard a caller complaining about how much he was losing. The host replied " have you sold your stocks"? The caller replied "not yet". The host responded with " well then you haven't lost anything yet". Remember that in this situation, you only lose when you sell. The market has one simple basic rule, "Buy low and sell high". It's not rocket science people.

Of course you're going to lose money if you panic and sell now as prices plummet. But if you ride it out and hold, and perhaps even pick up some more stocks while prices are down, it is possible to get some really good deals in these trying times. Unless you happen to stumble onto a up and coming stock and get in on the ground floor before the price skyrockets, you are not going to get rich overnight in the market.

The majority of the people who make money in the market are people who are in it for the long haul. Just look back at the numbers over the past decade. They go up....and they go down, there are cycles. A wise investor looks at times like these as an opportunity to purchase stocks at a much lower price than they normally would be able to, sock them away, and wait for the cycle to begin it's swing back the other way. Read your history, do some research, and grab some buys now while they're available.

If you're a novice investor, head over to Amazon and pick up some of the reading and reference books available from people who know what they're talking about. There are plenty of books out there to help anyone who is interested in learning more about buying and selling and investing.

For more information on Limit Down follow the links below:

Investopedia

Blogging Stocks

Bloomberg.com

Washington Business Journal