Recently, I often see people asking whether stocks can be bought or sold at the limit-up or limit-down prices. In fact, this is a question that many beginners are unclear about. Today, I will clarify this issue and share some practical experience.

First, let's give the most direct answer: both limit-up and limit-down can be bought and sold, but the transaction situations are completely different. That is the key point.

What are limit-up and limit-down? Simply put, limit-up is when the stock price rises to the maximum limit for the day, and limit-down is when it falls to the minimum limit. Taking Taiwan's stock market as an example, the regulation states that the daily price change cannot exceed 10% of the previous day's closing price. For example, if TSMC closed at 600 NT dollars yesterday, today the highest can only reach 660 NT dollars, and the lowest can only go down to 540 NT dollars. Once this limit is reached, the stock price will be locked, and the trend chart becomes a straight line. On the trading screen, limit-up is marked with a red background, and limit-down with a green background, making it easy to identify at a glance.

Now, onto the main point: how to buy and sell during limit-up?

At limit-up, buy orders are filled with a lot of people, while sell orders are almost empty. If you place a buy order, it may not be executed immediately because many people ahead are queued at the limit-up price waiting to buy. But if you place a sell order, it will almost certainly be executed right away because there are many buyers at that moment. Many people buy at limit-up because of this reason—buy orders are queued, and the execution speed is slow.

The situation is reversed at limit-down. When the stock hits the limit-down, many want to sell, but few want to buy. So if you place a buy order, it will be executed immediately. But if you place a sell order, you'll need to queue up because there are many orders waiting to sell at the limit-down price.

Here's an important trading rule to know: price priority and time priority. That is, the earlier you place an order, the higher your priority. If you notice a stock might hit the limit-down, the smartest move is to quickly place a sell order during the opening auction. After placing the order successfully, do not cancel it easily. Many people see that their stock hasn't sold after a while and rush to cancel and re-place the order, which actually pushes them to the back of the queue, making it harder to execute.

Sometimes, stocks at limit-down will see a brief liquidity release in the last 10 to 15 minutes before closing. This is the last chance to sell that day. Also, pay attention to the buy-side order volume at the limit-down price. If suddenly a large number of buy orders appear, it could be that the main players are stepping in to buy, and at this point, you might consider selling along with them, but act quickly.

Why does a stock hit limit-up? Usually, it's because the company announces good news, such as exceeding earnings expectations, receiving large orders, or market funds chasing a hot topic, like AI concept stocks or biotech stocks, which are often speculative favorites. Technical strength or large investors locking in their positions can also directly cause the stock price to be locked.

Why does a stock hit limit-down? The most common reason is negative news, such as a disastrous earnings report, company scandals, or industry downturns. Market panic can also trigger limit-downs, like the systemic risk during COVID-19 in 2020, where many stocks fell sharply. Additionally, large investors start unloading holdings, margin calls happen, or technical breakdowns occur—all of which can easily lead to limit-down.

By the way, the U.S. stock market does not have limit-up or limit-down rules. They use circuit breakers to control volatility. When the S&P 500 drops more than 7% or 13%, the entire market pauses for 15 minutes. If it drops 20%, trading is halted entirely. For individual stocks, if the price moves more than 5% within 15 seconds, trading is temporarily suspended.

When encountering limit-up or limit-down situations, the most important thing is to stay rational. Do not blindly chase high or sell low. First, understand why the stock is hitting the limit-up or limit-down before deciding whether to enter.

For example, if a stock hits limit-down but the company itself has no issues—it's just market sentiment dragging it down—it's likely to rebound later. Holding or small-scale accumulation is the best strategy in such cases. When seeing a limit-up, don't rush to chase; first confirm whether there are solid reasons supporting the continued rise. If the support can't hold, waiting on the sidelines is the best choice.

Another operational idea is that when a stock rises to limit-up due to positive news, you can consider buying related upstream or downstream companies or similar stocks. For example, if TSMC hits limit-up, other semiconductor stocks often move together. Some Taiwanese stocks are also listed in the U.S., like TSMC, which can be bought through overseas brokers or via cross-border trading. This approach offers more flexibility.