Yesterday morning, during my Premarket Prep session, someone brought up a trading halt in Air Transport Services Group (NASDAQ: ATSG).
It turned out the stock had news pending, which is why the halt occurred.
Most of my Daily Income Trader System subscribers know about trade halts, why they occur, and what to do when they happen. As a mentor, that’s one of the many lessons I teach…
In fact, as I reminded my audience this morning, always have the NASDAQ “Current Trading Halts” page bookmarked on your internet browser.
And print out the code sheet so you know what kind of halt you’re dealing with. There can be many reasons for halts and each one has its own identifier.
I’m glad this topic came up yesterday because it reminds me how important it is for every trader to understand it.
They happen every day, and you must be prepared if your position gets halted.
In day trading, we trade low-float, fast-moving stocks, so today, I want to discuss volatility halts specifically.
If you’re not familiar with them, this will be a good lesson, and if you are, a refresher is never a bad idea!
Table of Contents
Volatility Halts
If you’ve spent any time trading, you’ve probably experienced the scary moment when a stock you’re watching or holding suddenly stops trading.
The price action is halted, and you’re left waiting, wondering what comes next.
Welcome to the world of volatility halts.
These types of halts have been around for a while. The rule officially kicked off around 2013. Unless you’ve been trading for over a decade (like me!), volatility halts are just part of the game.
The markets love volatility—and so do we as day traders. It’s the excitement that brings opportunity. But with that thrill comes the drawback of sudden halts.
They can be frustrating, sometimes ruin a play, and can sometimes lead to bad decisions.
So today, I’ll give you some strategies to handle these unfortunate events.
What Causes a Volatility Halt?
A volatility halt occurs when a stock experiences a dramatic price swing within a very short period. That price swing is caused by some sort of catalyst—a huge earnings beat, a huge earnings miss, a short squeeze, etc.
The purpose of a halt? To prevent panic, restore order, and give everyone—including you—a chance to process new information and adjust accordingly.
These halts are triggered by predefined thresholds set by exchanges like the NASDAQ or the New York Stock Exchange. Once they’re triggered, they typically last five minutes, but they can be extended..
In practical terms, a stock might be halted if it jumps or drops a certain percentage within a 5-minute window.
Halts ensure the market doesn’t spiral into chaos when a stock goes through unusually sharp moves, whether it’s good news, bad news, or even a sudden and inexplicable price swing.
By the way, on the NASDAQ trade halt code sheet I mentioned earlier, volatility halts use “LUDP,” which means limit-up, limit-down.
Another thing to know: Volatility halts only happen during regular market hours. They won’t occur in pre-market or after-hours trading.
That’s why the wild price action you see in premarket won’t ever be halted…
But then as soon as the market opens — bam! Halt!
This is yet another reason to be extremely careful when eyeing or trading big pre-market movers.
How to Avoid Being Caught in a Halt
Avoid Trading in the First 15 Minutes
You’ve probably heard me talk about the “9:45 rule.” If not, read my recent blog post on the topic.
This rule suggests waiting for a certain amount of time after the market open before making trades.
Many volatility halts happen within those initial minutes, especially on low-float, high-volatility stocks.
Following the rule can prevent you from getting stuck.
You Don’t Have to Trade Every Wild Stock
Yes, they’re tempting but the massive movers often come with an equally massive amount of risk, including frequent halts.
Right now, there are plenty of what I call “real” stocks—higher-priced, more stable plays—that are moving 10-20% daily. Consider trading those if you want to avoid the stress of halts.
If you can’t stay away from the low-priced stocks, focus on day two or three of the move. Again, patience can be a virtue. By then, the volatility has most likely stabilized, and the odds of a halt are much lower.
To play the trading game safely and find stocks that are less likely to be halted, you need a great platform that features charting, technical indicators, stock screeners, and more.
My top pick is StocksToTrade. It has all of the above, and I use it every day. It also offers a selection of add-on alert services so you can stay ahead of the curve.
Grab your 14-day StocksToTrade trial today — it’s only $7!
What Do I Do if I’m Caught in a Halt?
I get this question all the time…
First, don’t panic. It’s easy to get emotionally charged when you can’t trade out of your position or jump into a sudden spike.
But remember, successful trading is all about managing risk, and part of that is understanding halts and being prepared when they happen.
And you might not like my next piece of advice but it works.
Once the halt is over, exit quickly using a limit order—not a market order. Adjust your pricing, but don’t linger.
Whether you’re long or short, whether you’re up or down on the trade, the best approach is to exit as soon as the stock unhalts.
Why am I telling you to get out of the trade?
Because post-halt moves are unpredictable. If the stock gaps up, it could slam down immediately, and if it gaps down, it could snap back up.
Yes, sometimes exiting quickly means you’ll miss out on further gains, and that’s frustrating. But it’s much more painful to hold on and watch the trade go against you in a flash.
My Final Thoughts…
Be smart and cautious when trading stocks prone to halts. Stick to the 9:45 rule, avoid overly volatile plays, and don’t let emotions rule if you’re caught in a halt.
Volatility halts are a natural part of the market’s landscape, particularly for low-float day-trade stocks. As traders, our job is to be prepared, stay informed, and have a game plan for handling these situations.
Remember, knowledge and preparation are your strongest assets.
Do you want to learn more about managing your risk, handling trade halts, and more? Join our StocksToTrade community.
We have tons of free live webinars that run all day and offer trading tips and tricks, info on our Oracle trading system, and other valuable training.
And if you’re looking for more trading mentorship as well as stock ideas, subscribe to my StocksToTrade Advisory service.
Every STT Advisory member gets a monthly newsletter with a list of my top picks, three weekly videos with my watchlists, bonus reports, and more.
Sign up for StocksToTrade Advisory right here!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
My colleague and fellow trader, Tim Sykes, is currently setting up for his Winter Blitz.
With the Winter Blitz strategy, he aims to make more gains in the next six months than he’s made in the last two years…
He’s done it before, and he’s ready to do it again!
Tim’s going live on November 11th and 12th to share his trading plan.
But seats are limited…You don’t want to miss this opportunity.