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Circuit Limits & Trading Halts

beginner5 min read

The guardrails that stop a stock from moving too far too fast in a single day.

To prevent panic and manipulation, exchanges cap how far a stock (or indexA basket of stocks tracked together to represent a market.) can move in one day. Hit the ceiling and it’s “upper circuitAn automatic trading halt when prices move too far.”; hit the floor and it’s “lower circuitAn automatic trading halt when prices move too far..” Trading in that direction then pauses or freezes.

A circuit is a cooling-off mechanism, not a price you can trade at. When a stock is stuck at upper circuitAn automatic trading halt when prices move too far., there are only buyers and no sellers — you literally cannot buy. Beginners chasing a “locked upper circuitAn automatic trading halt when prices move too far.” stock often can’t get in, then get trapped when it reverses to lower circuits on the way down.

IndexA basket of stocks tracked together to represent a market.-level circuit breakers (e.g. on a 10%/15%/20% NiftyA basket of stocks tracked together to represent a market. move) can halt the entire market briefly — a rare, dramatic safety valve seen in events like March 2020.

Key takeawayCircuit limits cap daily moves to curb panic/manipulation; a locked circuit means no sellers (or no buyers), so you often can’t actually trade there.
FAQs
Why couldn’t I sell a stock stuck at lower circuit?

At lower circuit everyone wants to sell and there are no buyers, so orders queue unfilled. This is the danger of illiquid, circuit-prone small-caps — you can be trapped as the price falls in steps with no exit.