The phenomena of limit up and limit down in the stock market, I think many beginners don't quite understand. Actually, this reflects an extreme imbalance in market buying and selling forces—either buy orders overwhelmingly dominate, or sell orders are overwhelming.

Let's start with limit up. When a stock rises to the maximum allowed percentage, trading stops, and it can't go higher. The regulation in Taiwan stocks is 10% of the previous day's closing price. For example, TSMC closed at 600 yuan yesterday; today, it can only rise to 660 yuan before hitting the limit. You will see stocks that hit the limit marked with a red background, with buy orders piled up, and almost no sell orders—because the number of people wanting to buy far exceeds those wanting to sell.

Limit down is the opposite. When a stock falls to the maximum allowed percentage, trading halts, with sell orders piled high and buy orders sparse. At this point, there are too many people wanting to sell, creating strong selling pressure.

Many people ask, can I buy when a stock hits the limit up? Yes. Can I sell when it hits the limit down? Also yes. But there's a key point—trades are not guaranteed. When a stock hits the limit up, if you place a buy order, there are already many buy orders waiting, so you might not get filled. But if you place a sell order, it will be executed immediately because so many want to buy. Conversely, when a stock hits the limit down, your buy order will be filled immediately, but selling might not be.

I've seen many beginners make the mistake of chasing the rise and selling the fall. When a stock hits limit up or down, the most important thing is to analyze the reason behind it. If a stock hits the limit down but the company's fundamentals are solid, and it's just market sentiment fluctuation, it might rebound later. In that case, the best strategy is to hold or build a small position. Conversely, when a stock hits the limit up, check whether there are genuine positive catalysts supporting continued rise; if not, it's enough to wait and watch.

Another approach is that when a stock hits the limit up, you can buy related companies or stocks in the same sector. For example, if TSMC hits the limit up, other semiconductor stocks often follow suit.

Different markets have different mechanisms. Hong Kong stocks and US stocks don't have limit up or limit down restrictions; they use circuit breakers instead. In the US, a 7% decline triggers a 15-minute trading halt; a 13% decline halts trading for another 15 minutes; a 20% drop leads to market closure. Individual stocks also have circuit breakers—if they fluctuate beyond a certain range in a short period, trading is paused. Hong Kong stocks use a combination of circuit breakers and market regulation to maintain stability.

If you really can't buy the stocks you want, you can consider other tools. Derivatives, futures, options—all are available but have higher thresholds. There's also a tool called Contract for Difference (CFD), which has a lower entry barrier, allows two-way trading, and isn't limited by limit up or down rules, making it more flexible.

In summary, limit up and limit down are market self-protection mechanisms. Understanding their principles is far more important than blindly trading.