Market Circuit Breakers Explained: Why Trading Sometimes Stops
When stocks fall too far too fast, US exchanges can pause trading. Learn how market-wide circuit breakers and single-stock halts work.
On rare days of extreme selling, US stock exchanges can temporarily halt all trading. These circuit breakers were strengthened after the 1987 crash and were triggered several times in March 2020.
Market-Wide Circuit Breakers
Market-wide halts are based on declines in the S&P 500 from the previous day's close:
- Level 1 — 7% decline: trading halts for 15 minutes (if before 3:25 p.m. ET).
- Level 2 — 13% decline: trading halts for another 15 minutes (if before 3:25 p.m. ET).
- Level 3 — 20% decline: trading stops for the rest of the day.
The goal is to give investors time to absorb information and reduce panic-driven selling.
Single-Stock Halts
Individual stocks can also be paused. The Limit Up-Limit Down (LULD) mechanism prevents trades outside set price bands, and exchanges may halt a stock pending major news. You can learn more about investor protections from FINRA.
What Should Investors Do?
Circuit breakers are designed for exactly the kind of moments when emotions run highest. Long-term investors usually do best by sticking to their plan — see our guides to bear markets and corrections.
Frequently Asked Questions
How often are circuit breakers triggered?
Can I place orders during a halt?
Do circuit breakers apply to after-hours trading?
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