Difference between Circuit & circuit breaker

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vaibhav joshi (Querist)

24 March 2009
Please tell me what is exact difference between the term 'Circuit' & 'Circuit Breaker'?

Thanks in Advance.

Taranjit Singh

Taranjit Singh (Expert)

02 April 2009 In the context of stock markets, circuit is the price limit or range, outside which the stock price can't go.
For example, let's say closing price of X stock yesterday was 100 Rs. The applicable circuit limit for X is 5%. In this circumstances, the price of X can't go above 105 (5% above previous close) and below 95 (5% below previous close).

Please not that this limit is different for different stocks. For some stocks, the limit may be 5%, while for some stocks, it may be 10% or 20% also. For a newly listed company also, there is a circuit limit of 20% from its issue price.

Hope, it is clear now.

Taranjit Singh

Taranjit Singh (Expert)

02 April 2009 On the other hand Circuit Breaker Refers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. Sometimes called a "collar."

After an index has fallen a certain percentage, the exchange might activate trading halts or restrictions on program trading. For example, if the Dow Jones Industrial Average falls by 10%, the NYSE might halt market trading for one hour. There are other circuit breakers for 20% and 30% falls.