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 huge role in protecting your money and stabilizing the market when things get wild.
In this blog, we’ll walk you through everything you need to know about circuit breakers in PSX, how they function, why they matter for your trades, 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 volatility. They act as shock absorbers when prices move too rapidly, helping calm down panic buying or selling.
Circuit breakers are part of a broader volatility control in the stock market, making it safer and more predictable for all investors — from first-timers to pros.
In the Pakistan Stock Exchange, there are two types of circuit breakers:
- Market-wide circuit breakers (based on the KSE 100 index movement)
Individual stock circuit breakers (based on daily price limits in PSX)
How Do Circuit Breakers Work?
Circuit breakers are automatic trading halts triggered when the price of a security or the entire market moves too quickly—usually downwards. Their main goal is to protect investors and prevent panic-driven market crashes.
Each stock listed on PSX has a defined daily price range — commonly +7.5% or -7.5% from the previous day’s closing price.
So, for example:
- If a stock closed at PKR 100 yesterday, it can only go up to PKR 107.5 or drop to PKR 92.5 today.
- If it hits either limit, it’s said to have “hit its circuit.”
- Once that happens, trading beyond that price is not allowed for the rest of the day — though you can still place orders within the allowed price range.
This helps prevent overreaction and keeps traders from making hasty decisions based on emotions or rumors.
Index-Based Circuit Breakers (Market-Wide):
KSE 100 Index Circuit Breaker
This is the market-wide circuit breaker. If the KSE 100 index — the benchmark index of PSX — drops by 5% or more within a short time, all trading on PSX halts temporarily.It’s like giving everyone (brokers, traders, investors) a breather to digest what’s happening before the stock market index continues.
Security-Wise Circuit Breakers (Individual Stocks):
- Each stock has a daily price limit (also called “upper/lower lock”).
- The limit is ±7.5% of the previous day’s closing price.
- Example:
- If a stock closed at PKR 100 yesterday, today it can only trade between PKR 92.50 to PKR 107.50.
- This prevents any single stock from crashing or rising uncontrollably in one session.
Why Are Circuit Breakers Important?
Whether you’re a seasoned investor or just started to Invest in PSX, circuit breakers are your best Défense against market chaos. Here’s why they matter:
- Prevents panic selling: In uncertain times (think political drama or economic shocks), traders can go into a frenzy. Circuit breakers pause the chaos.
- Avoids flash crashes: Automated trading and rumours can sometimes cause prices to crash within seconds. Circuit breakers help stop that.
- Creates thinking time: A short pause gives investors time to reevaluate and avoid emotionally charged decisions.
- Protects market integrity: It makes the PSX more trustworthy, especially for retail investors.
In short, circuit breakers are like seat belts: you might not always notice them, but you’ll be glad they’re there when things get bumpy.
What Triggers a PSX Market Halt?
A PSX market halt is triggered when the KSE 100 index experiences a sharp fall:
- 5% decline within the first two hours → 45-minute halt
- Further 2.5% drop after trading resumes → Additional halt of 15–30 minutes
This setup is built into PSX operations as part of the SECP trading rules. The Securities and Exchange Commission of Pakistan (SECP) monitors these movements and has the authority to extend or manage these halts if needed.
Circuit Breakers vs Trading Suspension
| Feature | Circuit Breakers | Trading Suspension |
| Triggered by | Sudden price movement | Regulatory or legal issues |
| Automatic? | Yes | No (manual by SECP/PSX) |
| Duration | Temporary (within day) | Can last days/weeks |
| Applies to | Stocks or entire market | Specific stocks only |
Trading suspensions are serious — they usually happen if there are concerns like insider trading, undisclosed material information, or rule violations. Unlike circuit breakers, you might not be able to buy or sell the stock at all until further notice.
How to Stay Updated on Circuit Breakers
The best way to stay ahead of the game? Use the KTrade app — it’s built for retail investors who want real-time market insight.
Here’s what the app offers:
- Real-time price alerts
- Circuit hit notifications
- PSX market halts updates
- Portfolio tracking
- Research tools and analysis
It keeps you informed the moment a stock hits its circuit or the market halts — so you can plan your next move smartly.Curious about stock analysis? Try the KTrade app for Stocks Comparison on the go.
Impact of Circuit Breakers on Stock Trading
Circuit breakers affect your trading strategy, no doubt. Here’s how:
- Limits your trading window: If a stock hits the upper or lower limit early in the day, you might miss your chance to act unless you are alert.
- Caps profits or losses: Great if you’re protected from a massive fall, but frustrating if you’re stuck trying to sell at a locked upper circuit.
- Influences price discovery: With limits in place, stock prices adjust more slowly to real-world news — which can be both good and bad, depending on your position.
- Affects liquidity: Fewer trades go through once a stock-hits its circuit, which could leave some buy/sell orders unfulfilled.
SECP Trading Rules & Volatility Control
The SECP trading rules define how much and how fast a stock or the market can move. This includes:
- Daily price limits for stocks
- Circuit breaker thresholds for KSE 100
- Monitoring of irregular price/volume activity
- Penalties for manipulative behaviour
This regulatory framework helps create a fair, efficient, and transparent market — which is essential if you want your money to be safe and your investments to grow.
Daily Price Limits in PSX: What You Need to Know
- Every stock in PSX has upper and lower limits for daily price movements.
- This means a stock can’t go up or down more than 7.5% (usually) in one day.
- If a stock hits this limit, we say it has hit its circuit.
Pro tip: Stocks with high news activity or quarterly earnings often hit circuits faster due to a surge in trading volume.
FAQ: Quick Answers to Common Questions
What happens when a stock hits its upper or lower circuit?
The stock becomes non-tradable beyond that price for the rest of the trading day. You can still place buy or sell orders, but only within the allowed range.
How can I stay informed about circuit breakers in PSX?
Use the KTrade app, which gives you:
– Real-time price alerts
– Notifications when a stock hits its circuit
– Updates on market-wide halts
It’s your best tool for staying alert and ahead in the market.
Do circuit breakers apply to all stocks?
Yes, every stock listed on PSX has daily price limits, but the limit % can vary depending on the category of the stock.
Are circuit breakers good or bad?
They’re great for protecting your investments during crazy market moments. But they can also lock you out of a trade if you’re not paying attention — which is why staying informed is key!
How long does a market-wide halt last?
Typically:
First halt: 45 minutes (if a 5% drop in KSE-100 within the first 2 hours)
Second halt: Another 15–30 minutes if the drop continues
Trading resumes after cooldowns unless SECP extends it.
Final Thoughts
Circuit breakers in PSX aren’t there to confuse you — they’re there to protect your money. By understanding how circuit breakers work, you gain an edge in managing your trades better, staying calm during market chaos, and avoiding costly mistakes.
Whether it’s the KSE 100 index circuit breaker, daily price limits, or PSX market halts, now you know exactly what they mean and how they work.
So don’t stress the sudden pauses. Instead, stay informed, plan smart, and use tools like the KTrade app to stay ahead.
Want to get started with investing? Here’s your first step —Invest in PSX today.
