What Are Circuit Breakers? (Trading Halts)
A circuit breaker is a rule that pauses trading when prices fall by a set percentage. United States market-wide breakers trigger at 7%, 13% and 20% declines in the S&P 500, and individual securities are governed separately by volatility bands that halt them far more often.
How it works
A circuit breaker is a pre-set price level that stops trading when it is reached. The levels are published in advance and calculated from the previous session’s close, so nobody has to decide anything in the moment.
United States market-wide breakers are keyed to the S&P 500 and come in three levels: a 7% decline, a 13% decline, and a 20% decline.
Levels 1 and 2 halt all trading for fifteen minutes, and each can only trigger once per day before 3:25 p.m. Eastern. Level 3 closes the market for the remainder of the session, at any time of day.
Only declines trigger them. There is no market-wide upside breaker, which is a deliberate asymmetry: the rules exist to interrupt disorderly selling, not to slow a rally.
The three levels, and the single-stock bands
The chart above is a scene built to contain a substantial decline, and the measurement is the point of it. Against a starting price of 99.97, the −7% level sits at 92.97, the worst decline reached −26.8%, and price traded below the first breaker level on 36 separate bars.
That figure is doing two jobs at once. It shows what a genuine market-wide event looks like — and it shows that once the first level is breached, the market spends real time beneath it rather than touching it and recovering.
Individual securities are governed by a separate mechanism. Limit up-limit down bands sit a percentage above and below a rolling average of recent trades, and trading is not permitted outside them. If price sits at the band for fifteen seconds, the stock halts for five minutes.
Those single-stock halts are ordinary. They happen many times a day across the market, mostly on smaller, thinner names reacting to news, and they have nothing to do with the market-wide levels.
The band width is not fixed. It varies with the security’s price, its tier, and the time of day — wider in the opening and closing periods, when volatility is expected to be higher.
In practice: what happens during a halt
A halt stops matching, not intent. Orders continue to arrive during the pause and accumulate, which is why the reopening price frequently sits well past where trading stopped.
The reopen is an auction, run like the opening auction described on the stock exchange page. Everything accumulated is matched at a single clearing price, and that price can be a long way from the last trade before the halt.
A stop-loss does nothing during a halt. A stop is an instruction to send a market order when a price prints, and no prices are printing. When trading resumes, the order joins the reopening auction at whatever that auction clears at.
A stop-limit behaves differently and not better. It refuses a fill worse than its limit, so on a reopen well below that limit it simply does not execute, leaving the position open in exactly the conditions you wanted out of.
The practical consequence is a sizing consequence. During a halt, the only variable still under your control is how much you own, because every instruction you have given depends on a market that is not currently running.
What a halt does not do
A halt is not a cancellation. Orders resting before it are still live unless you cancel them, and they participate in the reopening auction. Walking away from a screen during a halt leaves instructions running that were written for different conditions.
It is not a guarantee about the reopening price. The mechanism guarantees a pause and an orderly auction. It promises nothing about where that auction clears, and a large imbalance clears a long way from the last print.
It is not evidence that anything is broken. Single-stock halts are routine and mechanical, triggered by a band rather than by judgement, and most of them resolve in five minutes with no lasting consequence.
And it is not the same as a market closure. Only a Level 3 breach ends the session. The other two levels are pauses, after which the same day continues with the same positions and the same orders.
When it fails
Market-wide breakers almost never trigger, and treating them as a floor under a portfolio is the main error. The full three-level structure exists for conditions most traders will encounter a handful of times in a career, if that.
A halt also transfers risk rather than removing it. Fifteen minutes without a market is fifteen minutes during which nobody can adjust anything, and the imbalance that caused the halt is still there when it lifts.
News halts are the version most people actually meet. A pending-news halt on a single stock can last far longer than five minutes, and the reopening price reflects information that arrived while nobody could act.
And the levels reset overnight. A 6% decline on each of three consecutive days never triggers anything, because each day is measured from the previous close. The rule interrupts speed, not magnitude.
The original data
The corpus measured for this site contains 24,971 videos, and circuit breakers appear in none as a subject in their own right — they surface only inside crash retrospectives. The measurement on this page was therefore built rather than borrowed: 36 bars below the first level, on a scene whose maximum decline is 26.8%.
The single sentence worth keeping is about the stop. Every protective instruction you hold assumes a functioning market, and a halt is the state in which that assumption is false. Size is what remains.
Related
The stock exchange page explains the auctions a halt reopens into. Stop-loss covers the instruction that fails here and what it does the rest of the time. And order types sets out why a stop-limit refuses the fill a stop would have accepted.
The only thing I actually changed after living through a halt is position size, not stop placement. A stop is an instruction to a market, and during a halt there is no market to instruct — the only variable still under my control at that point was how much I owned.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.