Circuit Breaker
Market Structure
What it means
A market-wide rule that pauses all trading if a major index falls a set amount in a day, to let traders calm down. Different levels trigger longer pauses.
Example
In the US, if the S&P 500 drops 7% before 3:25 p.m., trading halts for 15 minutes (Level 1). A 13% drop triggers another 15-minute halt; a 20% drop ends trading for the day.
Mistake beginners make
Beginners expect their stop-loss to protect them during a circuit-breaker halt. It cannot -- once trading resumes, price may gap straight through your stop to a much worse fill.
Related terms
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