Trading halts—those sudden moments when the markets hit pause—can feel like the market just pulled the emergency brake. For casual investors, it’s confusing. For active traders, it’s an opportunity. At Cobra Trading, we specialize in helping serious traders understand these mechanics and capitalize on them with the speed and clarity that direct-access platforms like DAS Trader provide.
Key takeaways:
- Don’t fear the halt. Understand it. Analyze it. Respect the Risk.
- Let Cobra Trading be your edge in volatile markets.
What Exactly Is a Trading Halt?
A trading halt is a temporary suspension of trading for a particular security or, in some cases, the broader market. These halts are enforced by exchanges like Nasdaq or NYSE and are designed to ensure fair trading conditions, prevent extreme volatility, or allow for important information to be absorbed.
Think of it this way:
Imagine a crowded room where someone shouts explosive news—halting trading is like hitting pause so everyone can hear and process the news at the same time before making any decisions.
In 2023, SVB Financial (SIVB) was halted multiple times before it ultimately collapsed. Each halt allowed regulators and investors to process developing news about the bank’s liquidity issues.
Why Do Halts Happen?
There are several reasons a stock—or the entire market—may be halted. Here are the key triggers:
1. News Pending (Code T1)
If a company is about to release material news (earnings, FDA approval, merger announcements, etc.), the exchange may halt trading to ensure everyone gets the information at the same time. This levels the playing field between institutional traders and retail investors.
Example: Biotech companies often face T1 halts before announcing FDA approvals. When Moderna (MRNA) received emergency use authorization for its COVID-19 vaccine, trading was briefly halted to disseminate the news fairly.
2. Volatility Pause (Code LUDP – Limit Up/Down Protocol)
If a stock makes a rapid move beyond certain thresholds (usually 5% to 10% within a 5-minute period), a volatility halt kicks in. It typically lasts 5 minutes and is meant to cool off emotional buying or selling.
Example: On meme stock runs like GameStop (GME) in 2021, the stock was halted multiple times as it surged (or dumped) dramatically in minutes.
3. Regulatory Concern (Code H10 or T12)
These halts happen when there are irregularities, insider trading suspicions, accounting discrepancies, or investigations. The halt can last hours, days, or longer.
Example:Luckin Coffee (LK) was halted under a regulatory code in 2020 after a massive internal fraud was uncovered. The halt lasted days and ended with a delisting.
Types of Trading Halts
Trading halts fall into a few different buckets. Each type has a specific goal and impact on your trading decisions.
Market-Wide Circuit Breaker Halts
Triggered when the S&P 500 drops by a preset percentage (7%, 13%, or 20%). These are rare but were used in March 2020 during COVID market panic.
- Level 1: 7% drop = 15-minute pause
- Level 2: 13% drop = another 15-minute pause
- Level 3: 20% drop = halt for the rest of the trading day
Single Stock Circuit Breakers (LUDP)
Common for low-float and small-cap stocks. When they run up or down too fast, these 5-minute pauses are triggered automatically to prevent manipulation or panic. They are often referred to as “limit up” or “limit down” halts. You can see these “bands” or “prices” where a stock would halt due to limit up/down on the Level 2 window in platforms like DAS Trader Pro. This is especially helpful for traders that are trading very volatile stocks.
News-Based Halts (T1 → T2 → T3)
These follow a sequence:
- T1: Halt for pending news
- T2: News released, still halted
- T3: Resume trading at a set time
This timeline gives everyone a chance to digest the news and plan their trade.
What to Expect During a Halt
Understanding what happens during a halt can help you avoid emotional mistakes—and plan your next move.
Trading Stops
No orders are processed. You can enter orders, but they won’t be filled until the halt is lifted.
Use the Pause
Now’s your chance to:
- Check the news feed
- Plan your exit/entry based on technical levels or order book data
- Adjust your risk exposure
Halt Duration Varies
- Volatility halts: 5 minutes (often extendable)
- News halts: Typically 10–30 minutes
- Regulatory halts: Can stretch for days or longer
Pro tip: When a halt lasts longer than expected on a T1, T2 or T3 halt, it may indicate bad news is coming.
How Traders Can Navigate Trading Halts
At Cobra Trading, we empower traders with the tools and data to react fast. Here’s how to handle halts like a pro:
1. Set Real-Time Alerts
Use DAS Trader’s alerts and watchlists to track volatile stocks. Set audio/visual cues for volume spikes or sudden price shifts that may lead to a halt.
2. Evaluate Risk
If you’re in a halted stock, ask yourself:
- Am I okay with a big gap up or down?
- Is there news that could lead to continuation or reversal?
- Should I size down next time to reduce exposure?
3. Plan the Unhalt Trade
Traders often build strategies to trade the first 1-minute candle after a halt ends. But be cautious—volume surges and whipsaws are common.
Example setup:
- Watch for breakouts over the high of the unhalt candle
- Use tight stops to manage risk
- Don’t chase—volume can fake you out
Tools to Follow Trading Halts
Staying informed is your edge. Here are top resources Cobra Trading clients use:
- DAS Trader Pro: Real-time L2, halt codes, and hotkey setups
- Nasdaq Trader Halt List: NASDAQ Trading Halt List for live halt updates
- Benzinga Pro / TradeTheNews: For quick news flow
- Twitter: Follow @NYSE and active trader accounts for immediate halt alerts
- Halt Tracker Tools: Many active trading communities and trading rooms have members that already track this information and are posting in near-real-time
Final Thoughts
Trading halts might seem like roadblocks, but if you fully analyze the risk and limit your exposure, they may be a setup for a high-reward trade.
With direct access execution, fast locates for short selling, and real-time routing through Cobra Trading, you’re equipped to make the most of these volatile pauses.
