Circuit Breaker

AAA

DEFINITION of 'Circuit Breaker'

Refers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. Sometimes called a "collar."

INVESTOPEDIA EXPLAINS 'Circuit Breaker'

After an index has fallen a certain percentage, the exchange might activate trading halts or restrictions on program trading. For example, if the Dow Jones Industrial Average falls by 10%, the NYSE might halt market trading for one hour. There are other circuit breakers for 20% and 30% falls.

RELATED TERMS
  1. Flash Crash

    The quick drop and recovery in securities prices that occurred ...
  2. Stock Market Crash Of 1987

    A rapid and severe downturn in stock prices that occurred in ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) ...
  4. Panic Selling

    Wide-scale selling of an investment, causing a sharp decline ...
  5. Trading Curb

    A temporary restriction on program trading in a particular security ...
  6. Trading Halt

    A temporary suspension in the trading of a particular security ...
Related Articles
  1. Active Trading

    Connecting Crashes, Corrections And Capitulation

    Even though crashes, corrections and capitulations are bad news for investors holding the stock, there are still ways to profit.
  2. Options & Futures

    Market Problems? Blame Investors

    Investors are only human, and their irrational behavior can often move the market.
  3. Budgeting

    The Greatest Market Crashes

    From a tulip craze to a dotcom bubble, read the cautionary tales of the stock market's greatest disasters.
  4. Economics

    The Enduring Importance Of The DJIA

    The Dow Jones Industrial Average (DJIA) continues to be an important indicator of the economy, though some say the DJIA doesn't have the same import as it once did.
  5. The best way to measure the amount of systematic risk an investment has is to look at the investment’s beta.
    Investing

    Systematic Risk

    Systematic risk, also known as volatility, non-diversifiable risk or market risk, is the risk everyone assumes when investing in a market. Think of it as the overall, aggregate risk that comes ...
  6. Investing Basics

    What Does The Dow Jones Industrial Average (DJIA) Quote Represent?

    “The Dow” is regarded as the “pulse of the stock market,” as it is one of the most quoted and followed stock market indices by investors, market professionals and media.
  7. Investing Basics

    Is the Dow Jones a public company?

    Find out how the Dow Jones Industrial Average tracks the health of the U.S. economy. This fluctuating number indicates the strength of investor portfolios.
  8. Investing Basics

    Is the Dow Jones a stock exchange?

    Learn about the Dow Jones Industrial Average and its impact. This historically significant index provides a daily snapshot of American financial markets.
  9. Economics

    Where was the Dow Jones when Obama took office?

    Find out the value of the Dow Jones Industrial Average on the Jan. 20, 2009 inauguration of President Obama and how it has performed since.
  10. Investing

    When can you trade the stocks in the Dow Jones Industrial Average (DJIA)?

    Find out when you can trade shares linked to the Dow Jones Industrial Average during NYSE and Nasdaq trading sessions.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center