Stock Market Basics

Circuit Limit (Circuit Breaker)

A price band that, once hit, pauses trading in a stock or the whole market to prevent extreme, panic-driven price swings.

A circuit limit (or circuit breaker) is a maximum percentage price move — up or down — that, once reached, automatically pauses trading in a specific stock or across the entire market for a set period. It exists to prevent panic-driven or manipulation-driven extreme price swings from spiraling further, giving the market time to reassess calmly.

Two Types

  • Stock-specific circuit limits, which pause trading in just that one stock
  • Market-wide circuit breakers, which can pause trading across the entire exchange during extreme volatility

See how circuit limits relate to sentiment-driven price swings in How Stock Prices Move: Demand, Supply, and Market Sentiment.