What is a stock market circuit breaker?
In one line: A circuit breaker is a rule that pauses trading across the whole US stock market when the S&P 500 falls a set amount in one day: 7%, 13% or 20%.
The 3 levels
Each level is measured from the S&P 500's close the day before.
| Level | S&P 500 drop | What happens |
|---|---|---|
| Level 1 | 7% | 15-minute pause, if it happens before 3:25 pm ET |
| Level 2 | 13% | Another 15-minute pause, if before 3:25 pm ET |
| Level 3 | 20% | Trading stops for the rest of the day, at any time |
After 3:25 pm ET, a 7% or 13% drop doesn't pause trading. Only a 20% drop does. Each level can trigger only once a day.
A simple example
The S&P 500 closed yesterday at 6,000. Today:
- At 5,580 (down 7%), Level 1 triggers. All US stocks pause for 15 minutes.
- At 5,220 (down 13%), Level 2 triggers. Another 15-minute pause.
- At 4,800 (down 20%), Level 3 triggers. The market is closed until tomorrow.
These numbers are only to show the math.
When it has happened
Level 1 triggered 4 times in March 2020: on March 9, 12, 16 and 18, during the early COVID-19 sell-off. The current 7/13/20 rules have been in place since 2013.
Futures markets have their own price limits. CME Group publishes them at cmegroup.com.
Why it matters
The pause gives everyone time to breathe and take in news. Orders can still be entered or cancelled during a pause, depending on your broker.
It's also a reminder that prices can move further in a day than most people expect. Ideas like the Stop loss and a daily loss limit exist for days like these.
A common mistake
Mixing it up with a single-stock halt. A circuit breaker stops the whole market. A Trading halt stops one stock, often for news or a sharp move. They follow different rules.
Questions
What triggers a stock market circuit breaker?
A drop in the S&P 500 of 7%, 13% or 20% from the previous day's close. The first 2 levels pause trading for 15 minutes; the third closes the market for the day.
Is there a circuit breaker for rising prices?
Not for the market as a whole. The market-wide breakers only apply to drops. Single stocks have up and down limits under the limit up-limit down rules.
Do circuit breakers apply to crypto?
No. Crypto trades 24/7 with no market-wide circuit breaker. Some exchanges have their own safety rules.
Want the next step? We'll walk you through it.
Four free lessons by email, one every few days — each with a 10-minute exercise on a real chart.
Send Me the Free Lessons 4 short emails · No spam · Unsubscribe anytimeOr see the whole method, step by step:
See What’s Inside the Course Try everything free first. Decide when you're ready. · Open the free chart tool (works in the TradingView phone app)One chart idea a day, in plain English. Follow along: