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What is a circuit breaker in stock market? How does it work?

What is a circuit breaker in stock market? How does it work? And what is a trading halt?

Though these are rare occurrences but market situations like today can trigger these rare triggers.

A trading halts, sometimes referred to as a circuit breaker is a financial regulatory instrument that is in place to prevent stock market crashes from occurring. As a result, circuit breakers stop trading as per rules in order to allow accurate information to flow amongst market participants.

As a reminder, on Monday 9 Mar20, Asian markets on average have crashed over 4% and ES Mini S&P500 futures, Nasdaq futures are all in locked limit down trading halts.

What is S&P500 circuit breaker? How does it trigger?

For the New York Stock Exchange (NYSE) circuit breakers have three tiers. These circuit breakers react to the price change in the S&P 500. The first tier is a 7% decline in the S&P 500. Should that occur, trading will pause for 15 minutes. The next level is a 13% decline, that...

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How the CORONAVIRUS is Impacting Global Stock Markets

Outbreak of coronavirus or Covid-19 has resulted in crippling stock markets world over.

After hitting all time 2weeks ago, S&P500 has crashed over 10% in less than two weeks and the results are not much different elsewhere in the global markets.

Not All Asset Classes Are Down

Though there are several ways one can slice and dice asset classes, for this article I will assume four major asset classes and exclude cash and currencies:

  • Bonds US 30 years
  • Gold using Gold Futures
  • Stock Markets such as Dow Industrial, Dow Transport, S&P500, Nasdaq and Russell 2000
  • Commodities such as Crude oil

Since the crash began on 21st Feb, safe heavens assets like US Bonds have outperformed broader stock markets by roughly 15-16%.

US 30 Years Bonds have rallied +5.23% while S&P500 down -10%.

Surprisingly, Gold which acts has a safe heaven during uncertain times, didn't deliver great results either during these 8days period.However, ever since coronavirus outbreak was spreading from early...

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