Definition
Lower Circuit / Upper Circuit
Circuit limits are the maximum percentage a stock or index can move in a day before trading is halted or restricted.
Exchanges set price bands — an upper circuit caps the rise and a lower circuit caps the fall — to curb extreme single-day moves and panic. When a stock hits its circuit, trading may freeze at that limit until buyers or sellers appear, and index-wide circuits can halt the whole market for a set time.
For Indian F&O and intraday traders, circuits create real risk: a stock locked in the upper or lower circuit can leave futures and options positions stuck with no exit, and gaps through a circuit can cause large MTM losses. Stocks in F&O have wider or dynamic bands, but the risk of getting trapped remains.
Related terms
- VolatilityVolatility measures how much and how quickly a price moves up and down — higher volatility means bigger, faster swings.
- Mark to MarketMark to market (MTM) is the daily settlement of profit or loss on a futures position based on that day's closing price.
- Gap Up / Gap DownA gap is when a stock or index opens significantly above (gap up) or below (gap down) the previous close, leaving an empty space on the chart.
- Circuit BreakerA circuit breaker is a SEBI-mandated mechanism that halts trading in a single stock (via a price band) or across the whole market (index-based) when prices move too sharply in a day.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.