Why circuit breakers exist
Market-wide circuit breakers are coordinated trading halts designed to slow down panic selling and give participants time to process information during extreme moves.
The three U.S. market-wide levels
In the U.S., market-wide circuit breakers are triggered off declines in the S&P 500 at 7%, 13%, and 20% from the prior close.
What it means for you
- Execution risk: If a halt occurs, your order might not fill when you expect.
- Gap risk: After trading resumes, prices can "jump" as the order book rebalances.
- Stops aren't magic: Stops can fill worse than expected when liquidity is thin or the market reopens.
How to trade sensibly around them
- Reduce leverage when volatility is elevated.
- Use limit orders when spreads widen.
- Don't confuse "halted" with "safe." Risk can increase during uncertainty.