How do market-wide circuit breakers work?

Market-wide circuit breakers are measured against the S&P 500’s previous close, recalculated every day, and apply only during regular trading hours, 9:30 a.m. to 4:00 p.m. ET (see US stock market hours). When one triggers, trading stops on all US stock exchanges at once. The levels, as in the drawing at the top of this page:

  • Level 1: S&P 500 down 7%. Before 3:25 p.m. ET, all stocks halt for 15 minutes; at or after 3:25 p.m., trading continues.
  • Level 2: down 13%. Same rule: a 15-minute halt before 3:25 p.m., no halt after.
  • Level 3: down 20%, at any time of day: trading stops for the rest of the day.
  • Levels 1 and 2 can each halt the market only once a day.

What happens if the market drops 7% after 3:25 p.m.?

Hypothetical: the S&P 500 closed at 6,000 yesterday, so today Level 1 sits at 5,580, Level 2 at 5,220 and Level 3 at 4,800. If the index touches 5,580 at 10:15 a.m., every US stock stops trading until about 10:30. If it first touches 5,580 at 3:40 p.m., trading carries on; only a fall to 4,800 would still stop the day.

Market-wide halts are rare. Before 2020 the only one came on October 27, 1997, under older rules based on the Dow. In March 2020, the month the VIX closed at a record, Level 1 triggered four times: on March 9, 12, 16 and 18. Level 2 and Level 3 had never been triggered as of October 2026. A halt does not stop a decline: on March 16, 2020, the S&P 500 kept falling after its halt and closed down about 12%.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn session bar from 9:30 a.m. to 4:00 p.m. ET, drawn to scale and split at 3:25 p.m.: the long yellow part reads −7% / −13%, Level 1 or Level 2, with a pause icon and all stocks pause 15 min; the short hatched part after 3:25 reads no halt. Below, a red bar across the whole day reads −20%, Level 3, any time: closed for the day, and a note says Levels 1 and 2 can halt the market once a day each.

What is Limit Up-Limit Down (LULD)?

LULD protects individual stocks and ETFs during regular hours. Each has a price band above and below a reference price, the average price of its trades over the previous five minutes. For S&P 500 and Russell 1000 stocks and many large ETFs (Tier 1) priced above $3.00, the band is 5%; for most other stocks above $3.00 (Tier 2), it is 10%. Cheaper stocks get wider bands, and Tier 1 bands double in the last 25 minutes of the session.

Trades cannot print outside the band. If the price reaches the band and stays there for 15 seconds, a limit state, the listing exchange pauses the stock for five minutes, and the pause can be extended if buy and sell orders are badly out of balance. Trading then resumes through a reopening auction.

Hypothetical: a Tier 1 stock has averaged $100.00 over the last five minutes, so its band runs from about $95 to $105. Bad news drives it down to $95.00, no buyers step in for 15 seconds, and it pauses.

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A hand-drawn price line inside a channel of two dashed orange bands, $95 and $105, set 5% around a dotted reference line (the average price of the last 5 minutes). The price slides to the lower band and sits on it for 15 seconds (limit state), then a hatched box marks a 5-minute pause. After it, a reopening auction restarts trading lower, with new bands around the new reference price.

Why do stocks get halted for news?

Exchanges can also halt a single stock for reasons other than price, most often while important news is pending, such as a merger, a regulatory decision or results released during the session, so that everyone can read the news before trading resumes. A halt code on your platform tells you why: on Nasdaq, T1 means halted with news pending, and T12 means the exchange has asked the company for more information.

News halts have no fixed length: trading usually resumes once the news is out and the market has had time to absorb it. Other regulatory halts, for example when an exchange questions unusual trading, can last much longer. The short-sale circuit breaker (Rule 201) is a different rule: it limits short selling after a 10% drop and is covered in the short selling guide.

What happens to my orders when trading is halted?

Nothing executes during a halt or pause. Orders placed before it usually stay open unless you or your broker cancel them, and you can often cancel during the halt. Brokers differ on whether they accept new orders, especially market orders, while a stock is halted, so check your broker’s rules before you need them. Options on a halted stock usually stop trading too.

The danger is the reopening. Trading resumes through an auction that matches the orders that piled up, and the first price can be far from the last one before the halt. A stop order does not protect a price: if the stock reopens below your stop, the stop triggers and becomes a market order that fills near the reopening price. A limit order caps the price but may not fill at all; the order types guide covers the difference.

Hypothetical: you hold 100 shares bought at $48 with a stop at $45. The stock is halted at $47 pending news, the news is bad, and it reopens at $38. The stop fills around $38: a loss of about $1,000 instead of the planned $300. It is the same gap risk as overnight, covered in the gap trading strategy guide, compressed into minutes.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn chart: a stock bought at $48 trades near $47, then a hatched box reads halted: news pending, no trades. Trading reopens at an auction near $38. A dashed red stop line at $45.00 runs straight through the halt, and the stop’s fill is marked by a red dot at the reopening price, well below the stop. A yellow note reads planned loss $300, actual, about $1,000.

How to trade around halts and circuit breakers

You cannot avoid halts, but you can keep them from doing outsized damage, which is the point of risk management:

  • Size every position as if a gap could skip your stop; the position size calculator gives the share count for a fixed dollar risk.
  • Avoid market orders into a reopening; a limit order sets the worst price you will accept.
  • Do not chase the first print after a halt or pause: reopenings can swing hard in both directions.
  • Remember that a circuit breaker only pauses trading; it does not stop a decline.