Limits - ELI5 Explanation:

Imagine you're walking towards your friend, and with each step, you cover half the remaining distance between the two of you. Even though you're getting closer with each step, you'll never actually reach your friend. The concept of a "limit" in math describes what value you're getting closer to, even if you never quite get there.

Trading Context:

In trading, limits can be used to understand and analyze trends and behaviors that aren't immediately evident but become clear as certain parameters change.

Example: Let's say you're analyzing the impact of interest rates on a stock market index. As interest rates approach zero (or even negative values in some cases), the behavior of the stock market might change. The limit can help us understand and predict the market's behavior as interest rates approach this boundary.

Another trading-related context is the concept of "limit orders" in stock trading. While this isn't directly related to the mathematical concept of a limit, a limit order is an order to buy or sell a stock at a specific price or better. It "limits" the price at which the trade will execute.

Limits in Machine Learning and Trading:

When developing machine learning models for trading, understanding the limits of the model is crucial. This doesn't just mean the mathematical limits, but also understanding under what conditions the model will work and where it might fail.

For example, if a model is trained on data from a bull market, its predictions might not be accurate during a bear market. The "limit" of the model's understanding is the boundary of the data it was trained on.

In summary, the concept of a limit, both in its mathematical form and as a broader idea of boundaries and thresholds, is pivotal in various areas of trading and financial analysis. Understanding these "limits" allows traders to make more informed and strategic decisions.