GLOSSARY // Day Trading
Circuit Breaker
Market-wide circuit breakers halt all US equity trading when the S&P 500 falls 7% (Level 1), 13% (Level 2), or 20% (Level 3) from the prior day's close. Level 1 and Level 2 each trigger a 15-minute halt if they occur before 3:25 p.m. ET; after 3:25, trading continues unless Level 3 hits. A Level 3 decline stops trading for the remainder of the day.
The thresholds recalculate daily off the previous close, and Levels 1 and 2 can each fire only once per session. The design intent is a forced cooling-off period during a crash — the March 2020 selloff tripped the 7% Level 1 breaker four times in ten days, the only Level 1 events since the current thresholds took effect in 2013.
Single-stock volatility is handled separately by LULD halts; the market-wide breakers only respond to the index.
The S&P 500 closes Monday at 5,000. On Tuesday, Level 1 sits at 4,650 (down 7%), Level 2 at 4,350 (down 13%), and Level 3 at 4,000 (down 20%). If the index touches 4,650 at 11:00 a.m., every US stock halts for 15 minutes regardless of its own price action.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.