A. A circuit breaker is a safety device which stops the flow of electricity by switching itself off, if anything goes wrong.
The same applies in the financial world…
A circuit breaker, when it comes to the stock markets, is a regulatory instruction to stop ALL trading on an exchange for a short time, in order to control panic-selling.
It was created in 1987 after Black Monday.
There are three levels of Circuit Breakers that can kick in with the S&P 500…
Level #1 & Level #2: If the S&P 500 market drops 7% or falls (gaps) by 13% before 3:25pm, all trading will halt for the next 15 minutes.
Level #3: If the S&P 500 market drops by 20% before 3:25pm, all trading will stop for the rest of the day.
Fortunately, the JSE also has a circuit breaker to save the stock market from crashing too much.
There are three things to take note of with the JSE Circuit Breaker.
1st - If a Top 40 share drops 8% from the previous day’s closing price, a short-term halt is triggered.
2nd - If a share drops by 10% from the previous closing price or 3% from the last trade, all trading will stop for a temporary period.
3rd – There is no percentage drop that would stop the JSE trading for the day.
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*** Timon – what are your all-time stockmarket movie favourites
Q. I plan to read and learn as much about trading as possible during this lockdown… Could you maybe write a list of your favourite trading movies that I can start watching with my wife?
A. Sure, this is a great idea… And make sure you have a pen and paper ready to write down notes.
These notes should consist of terms that you can research later, what are legal and illegal practices as well as short quotes which apply to the financial markets.
Here are the top 9 stock market movies of all time…
Movie #1: Wolf of Wall Street (True story)
How Jordan Belfort was able to turn from an entry-job broker into a man who amassed over $200 million dollars through widespread corruption on Wall Street and in the corporate banking world.
Movie #2: Rogue Trader (True story)
How Nick Leeson takes advantage of the thriving Asian market to make risky trades and break the oldest bank in England.
Movie #3: Margin call (Inspired by true events)
This movie shows how a Lehman Brothers-like bank does everything it can to avoid falling into the financial crisis… The movie consists of capitalism, greed and financial fraud.
Movie #4: Boiler Room (Based on true events)
See how over 20 millionaires were made overnight through illegal, greed and corruption stock market practices.
Movie #5: Wall Street 1987 (Fiction)
A young stock broker who is desperate to get rich, gets to the top via insider trading with the help of his hero (Gordan Gekko).
Movie #6: The Big Short (Based on true events)
A movie where a smart bunch of financial experts are able to make millions of dollars by betting against the entire housing market…
Movie #7: Arbitrage (Based on true events)
A troubled hedge fund giant is desperate to sell his trading empire is faced with one crisis after another until he turned to an unlikely person for help.
Movie #8: Inside Job (Based on true events)
You’ll learn how the reckless actions of Wall Street lead to the global financial meltdown of 2008.
Movie #9: Wallstreet 2: Money Never Sleeps (Fiction)
Gorden Gekko (who is out of prison), now works with his future son-in-law to take down a Wall Street enemy and rebuild his empire…
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Managing Editor, Trading Tips