Circuit breaker is a term that, at first, can cause some fear, as it is closely associated with crisis scenarios. The best example was the consecutive days of sharp drops in stock markets around the world when there was a war in the price of oil and we were beginning to understand the pandemic situation that was emerging with the spread of the crisis caused by the coronavirus pandemic . But it's worth understanding the concept better to observe the scenario more calmly. The circuit breaker is a mechanism that exists precisely to protect investors in periods of volatility , as we will explain further in this article. So, when you hear about it, instead of panicking, the right thing to do is take the same action you took now: seek quality information on the topic.
To find out what a circuit breaker is, how it works and what its rules are, read on. See the topics we prepared for you: But what actually is a circuit breaker? Why is the circuit breaker activated? Understand the circuit breaker rules After all, what is the difference between an action cell phone number list auction and a circuit breaker? What is the history of the circuit breaker on Bovespa What were the last circuit breaker activations like in 2020? Could another circuit breaker occur at Bovespa? What comes after the circuit breaker. If you have any questions at the end, just leave a comment. But what actually is Circuit Breaker? Circuit breaker is a stock exchange mechanism that was designed to protect investors when there is a lot of selling, causing sudden drops in the prices of traded assets.
The mechanism operates through pre-established criteria, which determine the suspension of trading for a specified time when the day's drop reaches a certain percentage level. On the São Paulo Stock Exchange, B3, the first of these criteria (called stage I) occurs when the Ibovespa devalues 10% in relation to the index that closed the previous day. In this case, trading is stopped for 30 minutes. When they are resumed, new circuit breaker stages may occur, but we will explain all of this better in the topic “ Understand what the circuit breaker rules are ”, later on. For now, just understand that the circuit breaker is an atypical procedure. Although it is not triggered very frequently, it is important that these rules are predefined, as the dynamics of the trading session require quick solutions. This way, there is no time to think about an action plan when the situation is complicated.