Ever watched the stock market suddenly freeze — like someone hit a giant pause button? That’s no glitch. It’s what we call a circuit breaker.
If you’re investing in the Pakistan Stock Exchange (PSX) or planning to, it’s important to understand how circuit breakers work. They’re not just technical jargon — they play a big role in protecting your money and stabilizing the market when things get volatile.
In this blog, we’ll walk you through everything you need to know about circuit breakers in PSX: how they function, why they matter, and how to stay on top of them using tools like the KTrade app.
What Are Circuit Breakers in PSX?
A circuit breaker is a temporary halt or restriction placed on trading — either for the whole market or for individual stocks — to prevent extreme price swings.
They act as shock absorbers when prices move too rapidly, calming panic-driven buying or selling.
In the Pakistan Stock Exchange, there are two main types of circuit breakers:
- Market-wide circuit breakers (based on KSE-30 index movement)
- Individual stock circuit breakers (based on daily price limits)
How Do Circuit Breakers Work?
Circuit breakers are automatic trading halts triggered when the price of a security or the overall market moves too quickly. Their main purpose is to protect investors and prevent panic-driven crashes.
- Stock-specific limits:
Each stock has a defined daily price range — ±10% from the previous day’s closing price. Example:
If a stock closed at PKR 100 yesterday, it can only trade between PKR 90 and PKR 110 today. If it hits either limit, it is said to have “hit its circuit.” Beyond that, trading outside this range is not allowed for the rest of the day. Orders can still be placed, but only within the allowed band.
This mechanism prevents overreaction and stops traders from making rash decisions based on fear or rumors.
Index-Based Circuit Breakers (Market-Wide)
The KSE-30 index serves as the trigger for market-wide halts.
If the KSE-30 index moves ±5% from the last day’s closing value and stays there for 5 minutes, all trading on the PSX halts temporarily.
It’s like giving everyone — brokers, traders, and investors — a breather to reassess the situation before the market resumes. Security-Wise Circuit Breakers (Individual Stocks)
- Each stock has an upper and lower lock (±10%).
- Example: If a stock closed at PKR 100 yesterday, it can only trade between PKR 90 and PKR 110 today.
This ensures that no single stock crashes or spikes uncontrollably in a single session.
Why Are Circuit Breakers Important?
Circuit breakers are your first line of defense against market chaos. They:
- Prevent panic selling during political or economic uncertainty.
- Avoid flash crashes caused by algorithms, rumors, or sudden news.
- Provide thinking time, allowing investors to reassess calmly.
- Protect market integrity, making the PSX more reliable for retail and institutional investors.
Think of them as seatbelts: you may not notice them daily, but you’ll be glad they’re there when markets get bumpy.
Circuit Breakers vs. Trading Suspension
| Feature | Circuit Breakers | Trading Suspension |
|---|---|---|
| Triggered by | Sudden price movement | Regulatory/legal issues |
| Automatic? | Yes | No (manual by SECP/PSX) |
| Duration | Temporary (minutes to hours) | Can last days/weeks |
| Applies to | Individual stocks or entire market | Specific stocks only |
Trading suspensions are more serious. They usually happen due to insider trading, missing disclosures, or rule violations. Unlike circuit breakers, trading may stop entirely until regulators lift the suspension.
How to Stay Updated on Circuit Breakers
The KTrade app is built for retail investors who want real-time insights. It offers:
- Real-time price alerts
- Notifications when stocks hit their circuits
- Updates on PSX-wide halts
- Portfolio tracking
- Research tools and analysis
This ensures you’re informed the moment the market halts or a stock locks its circuit.
Impact of Circuit Breakers on Stock Trading
Circuit breakers affect trading strategies in several ways:
- Limit your trading window: If a stock locks early, you may miss opportunities.
- Cap profits/losses: They shield against big losses but can also prevent exits at higher prices.
- Affect price discovery: Price adjustments happen gradually, which can delay reactions to real news.
- Reduce liquidity: Once locked, fewer trades happen, leaving some orders unfilled.
SECP Trading Rules & Volatility Control
The Securities and Exchange Commission of Pakistan (SECP) oversees these rules to ensure fair play. They include:
- Daily price limits for stocks
- Circuit breaker thresholds for the KSE-30 index
- Monitoring for irregular price/volume activity
- Penalties for manipulative practices
This framework creates a transparent and efficient market, giving investors confidence in their trades.
Daily Price Limits in PSX: What You Need to Know
Every stock in PSX has upper and lower daily price limits. Currently, this limit is ±10%.
If a stock hits this limit, it is said to have “hit its circuit.”
Pro tip: Stocks with major news, corporate actions, or earnings announcements often hit their limits more quickly due to high trading activity.
FAQ: Quick Answers
What happens when a stock hits its upper or lower circuit?
It becomes non-tradable beyond that price for the rest of the session. You can still place orders within the allowed range.
Do circuit breakers apply to all stocks?
Yes, but the limit % can vary depending on stock category. For most, it’s ±10%.
Are circuit breakers good or bad?
They’re great for protection, but they can lock you out of trades — which is why staying alert matters.
How long does a market-wide halt last?
If the KSE-30 moves ±5% for 5 minutes, a temporary halt is imposed, usually followed by a pre-open session before trading resumes.
Final Thoughts
Circuit breakers in PSX are not barriers — they’re protectors. By understanding how they work, you can manage trades more effectively, stay calm in volatile markets, and avoid costly mistakes.
Whether it’s KSE-30 index halts or ±10% stock price bands, circuit breakers are vital for investor safety.
Note: PSX and SECP may revise these thresholds from time to time. Investors should always check the latest PSX notifications or use apps like KTrade for real-time updates.
So don’t stress the pauses. Instead, stay informed, trade smart, and use tools like the KTrade app to stay ahead.
Ready to invest in PSX? Your first step starts here.
