What is a circuit breaker in Stock Market?

Stock market players are 'sensitive' and tend to defy the laws of economics. The investors' actions are always governerd by greed and fear.

Circuit breakers are measures that are used by a stock exchange authorities when there is a need to avert a sense that something harmful is about to happen. Trading is then stopped for some time to let the market cool down. The principle on which they work is very much like fuse in the electrical meter , when the buying and selling of shares gets too frenzied, a circuit breaker is triggered

If the market changes more than 10%, trading is halted for one hour, more than 15% trading is suspended for 2 hours.

Circuit breakers were introduced in November 1992, it was used for the first time in the Bombay Stock Exchange on Tuesday, 9 March 1993 when the Sensex declined by more than 5% from the opening level.

Circuit breakers are implemented at three stages:

1, When the index moves up or down by 10 percent

2, When the index moves up or down by 15 percent

3, When the index moves up or down by 20 percent

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