Market Structure
What is Circuit Breaker / Circuit Limits?
Circuit breakers are automatic trading halts triggered when a stock or index moves beyond a defined percentage, designed to prevent panic-driven crashes in Indian markets.
Formula
Stock circuits: 5%, 10%, or 20% from previous close (set by exchange). Index circuits: 10%, 15%, 20% of Nifty/Sensex.
How to Interpret
Upper circuit = buying frenzy (can't buy more). Lower circuit = panic selling (can't sell more). Stocks in circuit limits may trap you, you cannot exit if a stock is in lower circuit with no buyers.
Typical Ranges
Avoid stocks that hit circuits frequently. F&O stocks have no circuit limits (riskier but more liquid).