Recently someone asked me, "Can you buy stocks when they hit the limit down?" This is actually a very good question because many beginners get stuck on this point, unsure whether they can still operate during limit up or limit down situations.

First, let’s state the conclusion: both limit up and limit down can be bought and sold, but the probabilities of transactions are completely different. I’ve noticed that many people still have a somewhat fuzzy understanding of this mechanism, so today I want to discuss the logic behind these extreme market conditions.

Simply put, a limit up is when the stock price hits the maximum allowed for the day (in Taiwan stocks, it’s the previous day’s closing price plus 10%), and a limit down is when it hits the minimum allowed (previous day’s closing price minus 10%). You can recognize this at a glance on the trading screen: stocks at the limit up are marked with a red background, the entire candlestick becomes a straight line, buy orders pile up, while sell orders are almost empty. Conversely, at the limit down, sell orders are overwhelming, and buy orders are sparse.

Now, here’s the key question: can you buy stocks at the limit down? The answer is yes, but you need to understand the logic behind it. When a stock hits the limit down, there are fewer buyers and more sellers, so if you place a buy order, it will likely be executed instantly. However, if you want to sell, you’ll need to queue up because many others are already waiting to offload at the limit down price.

This leads to a very practical trading tip. If you hold a stock that’s about to hit the limit down, don’t wait until it’s locked at that price to sell, because at that point, the price will keep falling. The smartest approach is to place your order during the pre-market auction, because the trading rule is “price priority, time priority.” The earlier you place your order, the higher your position in the queue, and the greater your chance of execution. Once your order is placed, don’t keep changing it. Many people see it hasn’t sold and rush to cancel and re-enter, but that often pushes your order to the back of the line, making it even harder to sell.

Sometimes, in the last 10 to 15 minutes before the market closes, a limit down stock can experience a liquidity release, with funds stepping in to buy cheap shares. That can be a good selling opportunity. Alternatively, you can monitor the buy orders at the limit down price; if you see a sudden surge of buy orders, it’s likely that big players are stepping in, and you might consider selling along with them—but act quickly.

Why do limit ups and limit downs occur? Limit ups are usually driven by good news, such as excellent earnings reports, big orders received, or market funds speculating heavily on hot topics like AI concept stocks. Sometimes, technical breakouts also trigger chasing buying, or large investors lock in their positions, leaving no stock available to sell, causing the price to hit the limit up directly. Limit downs, on the other hand, are caused by bad news like earnings misses, negative market sentiment, panic selling, or big players offloading holdings, which can easily trap retail investors. Technical breakdowns are also risky, as breaking key support levels often triggers stop-loss selling.

Interestingly, the U.S. stock market doesn’t have a limit up or limit down mechanism. Instead, they use a circuit breaker system, where trading is automatically paused if the price moves beyond certain thresholds, giving the market a breather. If the market drops more than 7%, trading halts for 15 minutes; at 13%, it halts again; if it falls 20% in a day, trading is suspended for the entire day. Individual stocks also have circuit breakers: if the price moves more than 5% within 15 seconds, trading is temporarily halted.

When facing limit up or limit down situations, the most important thing is to stay rational. Beginners often make the mistake of blindly chasing the rally or panicking and selling during a decline. But it’s crucial to first understand why the stock is hitting the limit. If a limit down is caused by short-term emotional reactions or market sentiment, and the company’s fundamentals are sound, it’s likely to rebound later. Holding or adding a small position during such times can be a good strategy. Similarly, when a stock hits the limit up, don’t rush to buy immediately; first confirm whether the positive news can sustain the rally. If unsure, it’s safest to wait and observe.

Another approach is to trade related stocks. For example, if TSMC hits the limit up, other semiconductor stocks often move in tandem, so you might consider buying related shares. Or, if a stock is listed both in Taiwan and in the U.S., like TSMC (TSM), you can also place orders through offshore brokers or via proxy, which offers more flexibility.

In summary, can you buy stocks at the limit down? Yes, but the transaction isn’t guaranteed. The real key is to understand what’s happening in the market, rather than blindly following the crowd. When facing extreme market conditions, stay calm and think carefully—your long-term trading results will improve significantly.