Here's a question that separates the traders who've been around long enough to get burned from those who haven't — yet. You've backtested your systematic strategy across five years of ASX data, the equity curve looks beautiful, and the Sharpe ratio is embarrassing other people's strategies at dinner parties. Then the market halts. And your model has absolutely no idea what to do.
Trading halts and circuit breaker events are the unglamorous cousins of volatility spikes. They don't show up cleanly in OHLCV data. They don't trigger your indicators. They just quietly detonate assumptions buried deep in your system logic — assumptions about liquidity, about fills, about the ability to exit a position when you need to.
The ASX uses two main mechanisms to interrupt trading. A trading halt is company-initiated — management requests a pause, typically around material announcements, and it can last up to two full trading days. A circuit breaker, by contrast, is exchange-initiated and automatic, triggered when a security's price moves beyond a defined threshold within a short window. Both create the same brutal problem for systematic traders: your position exists, your stop-loss is armed, and the market is simply closed for business.
So how do you actually stress-test for this? The practical approach runs in three layers. First, identify every halt event in your historical data window — the ASX publishes this information, and third-party data vendors tag these periods. Then inject artificial halt durations into your backtest engine, forcing the strategy to hold positions for one to two extra sessions regardless of what signals say. Second, model the gap-open risk. When a stock resumes after a halt, it frequently opens significantly away from the last traded price. Slippage assumptions built on normal trading conditions become fiction. Multiply your assumed slippage by three to five times for any position that was live during a halt, and see whether your strategy's edge survives that honest accounting. Third — and this is the layer most people skip — test your position-sizing logic under forced illiquidity. If your system sizes positions partly based on average daily volume, a halt breaks that assumption entirely. A sensible approach is to impose a maximum single-stock exposure rule precisely because halts concentrate risk in a way diversification normally handles. Resources like the Investopedia explanation of trading halts, the Wikipedia overview of trading curbs and circuit breakers, and the Investopedia circuit breaker definition all help build the conceptual foundation before you touch your backtest code.
A strategy that only works when markets behave isn't a strategy — it's a weather forecast that assumes sunshine forever.
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