The position limit option helps prevent your model from becoming overconcentrated in a single security.
This section really only comes into play if you include overlays or other rules that could result in your model failing to reach its target number of holdings.
Let's look at a scenario where a model is set to own 10 stocks and also has an overlay that states all stocks need to have a technical attribute rating of 4 or higher.
In this case, only 5 of the stocks in the top 10 meet the overlay condition.
If the position limit is kept at the default value of 100%, the model will simply spread the allocation out among the 5 stocks that meet the overlay condition, and as a result, each will have a target weighting of 20%.
If the position limit was instead set to 15%, 75% of the portfolio would be allocated to those 5 stocks (15% x 5) and the remaining 25% would be allocated to MNYMKT (or whatever security you enter in its place).