What is a trading halt?
In one line: A trading halt is a pause in trading for a single stock, called by the exchange for pending news or because price moved too far too fast.
The 2 main kinds
1. News halts. The exchange pauses a stock so big news can reach everyone at once. Think mergers, trial results or major announcements. Trading usually resumes after the news is out.
2. Volatility pauses (LULD). Under the "limit up-limit down" rules, each stock has a band around its recent average price. If price can't trade inside that band for 15 seconds, trading pauses for 5 minutes.
For many large stocks the band is 5%. It's wider for others and for low-priced stocks.
There are also rare regulatory halts. The SEC can suspend trading in a stock for up to 10 trading days.
A simple example
A large stock has been averaging $100 over the last 5 minutes. Its band is 5%, so roughly $95 to $105.
Sudden selling pushes the bid to $95 and it stays stuck there. After 15 seconds, the stock pauses for 5 minutes.
When it reopens, it might trade at $93, or bounce to $98. Nobody knows in advance.
Why it matters
During a halt you usually can't get out. Your Stop loss can't fill while the stock isn't trading.
When trading restarts, price can jump straight past your stop. You'd fill at the next available price. That's Slippage, and it can be large.
A common mistake
Buying a stock that's been halting up and down all day. Fast-moving small stocks, often in a Short squeeze, can halt again and again. Each reopen can be a big Gap. Your planned risk may not match your real risk.
If a stock has halted several times today, size smaller or sit it out. A smaller size keeps a surprise reopen from hurting the whole account.
Our risk management guide covers how to plan for moves like this.
Questions
How long does a trading halt last?
A limit up-limit down pause usually lasts 5 minutes. News halts often last until the news is out, which can take 30 minutes or more. Regulatory halts can last days.
What happens to my orders during a halt?
Open orders usually stay in place, though brokers differ. They can't fill until trading resumes, and then they may fill at a very different price.
What is the difference between a halt and a circuit breaker?
A halt stops one stock. A Circuit breaker stops the whole US stock market after a big drop in the S&P 500.
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