A circuit breaker is an automatic halt to trading on an exchange when the market drops too far too quickly. Circuit breakers are designed to prevent panic selling and give investors time to reassess. Trading pauses for a set time period, usually 15 minutes, before resuming.
If the S and P 500 index falls 7 percent in a single day, a circuit breaker will halt trading for 15 minutes. This pause allows investors to step back and prevents a sudden market crash from spiraling into panic. Once the 15 minutes pass, trading resumes normally.
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