What Is A Circuit Breaker?

Written by John Stuart on June 15th, 2017

Learn more about the safety measure an exchange can enforce during crazy price movements

Black Monday was a disaster for many traders, but it gave birth to something quite special…

You see, on October 19th in 1987 the Dow Jones hemorrhaged 508 points in a single day.

Wham!

Just like that, 22.6% disappeared in a matter of hours.

Because of this, regulators decided to introduce measures that would allow them to avoid things like this happening in the future.

These measures were called circuit breakers.

Circuit breakers simply stop trading for a certain amount of time or even close trading early, during times of exorbitant price changes in the market as a whole or in the price of individual securities.

But what types of circuit breakers are there, how do they protect you, and what other benefits are there to having them?

Let’s take a closer look…

 

How The Market Protects You During Exorbitant Price Volatility

 

What Is A Circuit Breaker?

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