Investing term
What is Circuit breaker?
An automatic trading halt that fires when the broad market falls past a threshold.
A circuit breaker is an automatic, market-wide trading halt that kicks in when a major index falls past set thresholds in a single day. It pauses trading for everyone at once, letting panic cool and information spread before trading resumes, rather than allowing a freefall driven purely by stampede.
The halts are temporary and tiered: a moderate drop triggers a short pause, a deeper one a longer halt, and an extreme fall can close the market for the rest of the day. They were introduced after crashes where selling fed on itself, and they act as a built-in timeout — not a fix for the underlying news, but a circuit that stops the wiring from overheating.
When a major index falls 7% in a day, a circuit breaker halts all trading for 15 minutes — a deliberate pause to stop panic from feeding on itself. For investors, a cue to do nothing.
For example
If the S&P 500 falls 7% in a day, US markets halt for 15 minutes — a built-in timeout to stop a crash feeding on itself.
Learn it by doing
That's Circuit breaker in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 5, How Markets Work Globally).
Try the free lesson →Why it matters to you
Circuit breakers matter because they're a reminder that markets have guardrails against pure panic — and because for a long-term investor, they signal a moment to do nothing rather than something. A halt is the market's way of saying 'catch your breath,' and the worst reaction is to queue up a panic sell for the reopen. Knowing they exist, and that they're temporary and normal in a crash, is part of not being stampeded.
⚠ Treating a halt as a reason to panic
A circuit breaker can feel alarming — trading has stopped, the market is falling hard. But the halt is a deliberate cooling-off, not a sign to rush for the exit. Investors who use the pause to line up panic sells for the reopen often lock in losses near the bottom. The halt is designed to slow you down; let it.