How markets work
Circuit breaker
Also called Trading halt or Limit up limit down
An automatic pause in trading, triggered when prices move too far too fast.
How it works
Exchanges halt trading in an individual security, or occasionally an entire market, when a price move exceeds a defined threshold in a short window. The pause gives participants time to react to information rather than to each other.
Halts also occur voluntarily around company announcements, so that material news reaches everyone before trading resumes.
Where it misleads people
You cannot trade out of a halted security. If you are relying on being able to exit, a halt is exactly the moment you cannot — and halts cluster in crises.
Related terms
- VolatilityHow much an investment’s returns bounce around their average — the standard measure of risk.
- GapA jump between one session’s close and the next session’s open, with no trading in between.
- ExchangeA regulated marketplace where buyers and sellers of securities are matched under published rules.
- LiquidityHow quickly you can turn something into cash at a fair price, without moving the price against yourself.
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