How to Trade S&P 500 Circuit Breaker Conditions

Yesterday, March 9, 2020, fast price fluctuations triggered a market “circuit breaker,” whereby the markets temporarily paused. Officially, this is called a “cross-market trading halt.” The big S&P 500 is often considered the leading indicator of U.S. (and perhaps the world) corporate/economic performance.

Trigger (Level) 1: If S&P drops 7%, trading pauses for 15 min.
Trigger (Level) 2: If S&P drops 13%, trading pauses (again) for 15 min.
Trigger (Level) 3: If S&P drops 20%, trading stops for the day.

According to CNN, “…circuit breakers pause and ultimately halt trading to avoid a repeat of ‘Black Monday’ on October 19, 1987, when the Dow crashed 22.6% in a single day.”

Would you like to know how to trade such conditions? Watch this video…

As you can see, the Trade Scalper produced a number of accurate signals. When the ATR (with a period value of 4) exceeds the values discussed in the video, be careful and use your stops.

We applied the Atlas Line to a 1-Minute chart and noticed a number of good signals throughout the day as well. With the Atlas Line, the goal is usually to make a profit within four bars. We normally use a 5-Minute chart, but due to volatility, it may benefit you to use a smaller time frame like a 1-Minute chart.

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