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The Emergence Of Circuit Breaker

The Emergence Of Circuit Breaker. The circuit breaker is one of the methods used by financial institutions that conduct financial markets, especially stock markets and futures markets, to reduce the sharp declines or rises that occur within a short period of time is Is Binary Option Club A Scam which may be defined by the prices of financial indicators or prices Other financial assets, which may be the result of events or news, or even technical damage, in order to control the panic that may be experienced by Binary Option Club traders and prevent the collapse of markets.

The mechanism was used for the first time after the collapse of the global financial markets on December 19, 1987 and the event known as the Black Monday, where financial markets collapsed more than 20% of its value within one day, with losses on the US stock market on this day Nearly $ 500 billion. For the day alone, the Dow Jones industrial average lost 22.6%, or 508 points, its biggest one-day loss in history.

Black Monday is one of the most famous events in the history of financial markets as a result of the huge collapse in Wall Street stock prices in just a few hours. After the markets were experiencing significant growth, many investors made more purchases, With mergers that were known to be unusually high.

Circuit Breaker

Circuit Breaker

The week before this day was known as the US government’s issuance of a law limiting the tax concessions of companies that carry out mergers, in addition to the announcement by the US State Department of the figures of the trade deficit, which exceeded the expected figures. With the start of Monday Binary Option Club investors made a large sell-off which led to the execution of most stop-loss orders for investors who owned buying positions, this pressure created large price gaps that resulted in a wave of panic among investors, resulting in a collapse in the markets, Losses to hundreds of billions of dollars.
How the mechanism of curb trading
As a result of the collapse of the markets on Monday Black, and immediately after the event, the Securities and Exchange Commission (SEC) has enacted many rules and laws, including the circuit breaker, the mechanism that was started In 1988, in response to a US Senate order. In an attempt to prevent markets from collapsing by temporarily suspending trades on indices or equities when prices are sharply reduced in a short period of time.

Most of the world’s stock exchanges are currently using a curb mechanism as a means of reducing the sharp fluctuations identified by various financial assets, especially equity markets. A threshold is set for the rate of increase or fall in the prices of these assets over a period of time. When this threshold is reached, the institutions involved in the management and control of the financial markets stop trading on these assets automatically for a short period of time in order to give traders an opportunity to recover their breath and rephrase their decisions more rationality.

This Binary Option Club Review¬†mechanism has been known for many updates and changes. Currently, the rules enacted on April 8, 2013, known as the “80B” law, are followed and the restraining processes are divided into 3 levels. The first level represents a decline of 7%, the second level represents 13%, and finally the third level, which represents a decline of 20%.

These levels are the threshold for the S & P 500 to stop trading for 15 minutes if the rate of decline compared to the previous day is equivalent to the first and second levels (7% and 13% decline) This occurred after 3:25 EST, meaning that the stop trading will not take place if the trading session is closed for only 5 minutes. If the rate of decline within the third level, a decrease of 20% compared to the previous day, will stop trading for the rest of the day.

The restraining mechanism is applied in other markets such as the Chicago Mercantile Exchange (CME) and using the same levels of price declines, except that the Chicago Mercantile Exchange may stop trading on a futures contract if the rate of decline or rise exceeds the level 5% in operations that take place after the closure of the session.

In addition to the Binary Option Club Trading¬†indices and futures, the mechanism of trading is applied individually to the individual if a certain threshold is reached in both the upside and the bearish trend. Trading on any stock exceeding this threshold, which varies according to the size of the company’s market values