Difference between Circuit & circuit breaker

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vaibhav joshi (Querist)
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24 March 2009
Please tell me what is exact difference between the term 'Circuit' & 'Circuit Breaker'?

Thanks in Advance.

Taranjit Singh

Taranjit Singh (Expert)
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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)
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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.

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