Concept
Circuit Limits and Trading Halts
A circuit limit is a price band beyond which a security cannot trade in a session. Market-wide circuit breakers halt trading across the exchange when a benchmark index moves beyond defined thresholds.
How to read it
- Individual securities have price bands set by the exchange, and the band width varies by security and can be revised.
- Market-wide breakers are triggered by defined percentage moves in a benchmark index and pause trading for a specified duration, with the length depending on the threshold and the time of day.
- When a security is locked at a circuit, orders may rest unfilled because there is no counterparty at the permitted price.
What it does not tell you
- A stop-loss cannot execute in a locked security. The position remains open at whatever the circuit price is, regardless of the stop.
- A circuit does not stop the underlying situation developing. It pauses trading, and price can reopen well beyond the band.
- Specific thresholds, halt durations and applicable securities are set by exchange and regulator and are revised periodically. Confirm current rules with the exchange.
Frequently asked questions
What is a circuit limit?
A price band beyond which a security cannot trade during a session. Once price reaches the band, trading can only occur within it.
What happens to my stop-loss if a stock hits circuit?
It may not execute, because there may be no counterparty at a permitted price. The position stays open regardless of the stop having been triggered.
What is a market-wide circuit breaker?
A halt applied across the exchange when a benchmark index moves beyond defined thresholds. The pause duration depends on the threshold breached and the time of day.
Do circuit limits apply to F&O?
Derivatives have their own operating ranges rather than the same price bands as cash securities, and market-wide halts suspend derivative trading as well. Check current exchange rules for specifics.
Related
- Liquidity and the Bid-Ask Spread — Concept
- Order Types: Market, Limit, SL and SL-M — Concept
- Slippage — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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