How Futures Circuit Breakers Trigger: Price Bands You Must Know
Futures circuit breakers aren’t random “halt buttons.” They are strict price bands set by the CME to prevent markets from spiraling out of control during extreme volatility. If you don’t know these levels, you’re trading blind—your position can get frozen instantly while the market locks limit-down or limit-up.
The Three Types of Circuit Breakers
The CME uses multiple layers of protection depending on the time of day and severity of the move.
| Breaker Level | Trigger | What Happens |
|---|---|---|
| Limit-Up / Limit-Down Bands | Hit the price band | Price can’t trade beyond the band |
| Level 1 Breaker | 7% drop in index futures | 15-minute halt during RTH |
| Level 2 Breaker | 13% drop | Another 15-minute halt |
| Level 3 Breaker | 20% drop | Trading shuts down for the day |
If you’ve never studied volatility rules before, skim Limit Up / Limit Down Explained.
How Price Bands Are Calculated
Price bands are based on the previous day’s settlement price. The CME publishes the allowable price range every session.
Example for ES:
- If ES settles at 5300, and the overnight band is ±5%,
- Price can only trade between 5035 and 5565 during that window.
Once price hits a band, it stops there—trading can continue, but it cannot go beyond the limit.
Why Circuit Breakers Exist
They aren’t there to “protect retail.” They exist to stop cascading liquidations that could destabilize the entire financial system.
They prevent:
- runaway margin calls
- flash-crash style collapses
- forced liquidation spirals
- institutional panic
What Happens When a Breaker Hits
When price slams into a circuit breaker:
- The book becomes one-sided
- Price sits pinned at the band
- Volume falls off a cliff
- Market orders get stuck waiting
You cannot trade past the limit. You can only trade at the limit or wait.
Why Overnight Limits Hit More Often
Overnight liquidity is thin. When major news drops outside regular trading hours, the book can’t absorb the order flow.
So volatility events like:
- geopolitical shocks
- earnings for mega-cap stocks
- economic news leaks
- sudden rate rumors
push price straight into the limit bands.
How This Impacts Stop Losses
Stops don’t fill beyond a limit band. If price hits limit-down, your stop-loss sitting below it won’t execute until trading resumes or the band expands.
This is exactly how traders get stuck in catastrophic positions.
Final Takeaway: Circuit Breakers Are Hard Limits
Learn the price bands for the contracts you trade. If the market hits a circuit breaker, your position is frozen. Your stop doesn’t save you. Understand the rules or risk being trapped in a violent move with no way out.