Recently, I’ve seen many people in trading communities asking: once a stock hits the limit-up or limit-down, can they still buy and sell? Actually, this is a good question, because many beginners see the stock price locked and think it can’t move at all—but that’s not the case.

First, let me briefly explain what the limit-up and limit-down boards are. Limit-up means the stock price has already risen to the maximum limit allowed for the day and can’t go any higher; limit-down is the opposite—when the stock price falls to the day’s minimum limit and can’t fall any further. Taking Taiwan’s stock market as an example, the regulations state that the daily price movement for listed and OTC stocks cannot exceed 10% of the previous day’s closing price. For instance, if TSMC closed at 600 NT dollars yesterday, then today the highest it can go is only 660 NT dollars, and the lowest it can drop to is only 540 NT dollars.

How do you tell at a glance whether a stock is on the limit-up or limit-down board? The most obvious sign is that the stock price doesn’t move at all, and the price chart turns into a straight line. On Taiwan’s market screen, limit-up stocks are marked with a red background, while limit-down stocks are marked with a green background. When you look at a limit-up stock, you’ll find that there are especially many buy orders, and almost no sell orders—because the number of people who want to buy far exceeds the number of people who want to sell. The situation is reversed for limit-down boards: there are tons of sell orders and very few buy orders, so the sell side is full and the buy side is empty.

Now back to the question everyone cares about most: when a stock is on the limit-up, can you still buy or sell? The answer is yes—you can still place orders normally. However, note that if you place a buy order, it may not fill immediately, because there are already a lot of people queued up waiting to buy at the limit-up price. But if you place a sell order, it will basically execute right away, because there are many people trying to buy at this moment. Limit-down works the same way—you can place trades. At that time, if you place a buy order, it will basically fill right away, because there are many people who want to sell this stock. But if you place a sell order, you may have to wait in line, because there are so many sell orders waiting at the limit-down price.

I want to emphasize one thing: after a stock hits the limit-down board, it’s usually quite likely that it will continue falling in the coming trading days. If you wait until it really hits the limit-down to sell, you often end up selling at an even lower price. So once you notice that a stock may be headed toward the limit-down, you should place a sell order as soon as possible during the opening auction. The trading rule is “price priority, time priority”—the earlier you place the order, the higher your position in the queue, and the better your chances of getting filled. After your order is successfully placed, it’s best not to move it. Many people see that it hasn’t been sold and get anxious, then cancel and re-place the order; that actually pushes them to the back of the queue, making it harder to get filled.

What situations can cause a stock to hit the limit-up? Usually it’s driven by positive news—such as the company releasing strong financial results, quarterly revenue surging, or receiving large orders—so market funds rush in immediately. Or it can happen when the market chases a hot theme, like AI-related stocks: due to a boom in server demand, some AI concept stocks directly surge into the limit-up. Another possibility is that shares are effectively “locked up” by big players—such as foreign investors or investment institutions continuously buying—so there are basically few shares left available to sell in the market; then a small push is enough to lock the stock at the limit-up.

On the other hand, the reasons behind a limit-down are more worrying. The most common is a shock from negative news. Whether it’s disastrous earnings, worsening losses, or a company making a major mistake involving financial fraud, once the market is panicking and selling pressure floods in, it’s hard to escape. Rising panic in the market can also lead to limit-downs—such as when systemic risk breaks out and a bunch of stocks just fall directly to their limit-down. When major institutional players start unloading, retail investors are easily “cut” and suffer losses. Even worse, margin calls and forced liquidations can trigger a surge in selling pressure, leaving retail investors with no time to get out. Technical breakdowns are also one cause—for example, falling below key support levels like the monthly or quarterly moving averages can trigger stop-loss selling pressure.

Interestingly, the U.S. stock market is completely different. There’s basically no concept of limit-up or limit-down, but they have circuit breakers. In simple terms, if a stock’s price wildly surges or plunges to a certain level, the trading system will automatically pause trading for a period to let the market cool down before reopening. The overall market circuit breaker is triggered when the S&P 500 drops by more than 7% or 13%, causing the whole market to rest for 15 minutes; if it drops 20%, trading stops for the day. For individual stocks, if a stock rises or falls too quickly within a short period, trading may be temporarily suspended.

When investors encounter a limit-up or limit-down, the most common mistake is chasing after the price goes up and selling after it goes down. Actually, you should first figure out why the stock hit the limit—only then can you decide whether to enter. For example, if a stock hits the limit-down, but the company itself has no real problems and it’s mainly being dragged down by market sentiment or short-term factors, it may very well rise again later; in that case, holding or starting with a small position may be the best strategy. When you see a limit-up, don’t rush to chase it—first check whether there is truly some major positive catalyst that can keep the stock rising. If you think it can’t hold, standing by and observing is the best choice.

When a stock hits the limit-up due to positive news, you can consider buying related upstream and downstream suppliers or similar stocks that are closely connected. For example, if TSMC hits the limit-up, usually other semiconductor stocks will also move with it. Also, some Taiwanese stocks are listed in the U.S. For instance, you can buy TSMC (TSM) on the U.S. stock market; if you want to invest, you can place orders through DRs (foreign share depositary receipts) or overseas brokers.