Recently, I’ve noticed that some stock trading is subject to special restrictions: the matching time becomes longer, and margin trading and short selling (financing and securities lending) are not allowed. Behind this, there’s actually a professional term called “stock disposal.” Many people don’t fully understand what stock disposal means, so today let’s talk about this topic.

Have you ever run into a situation like this? In a short period of time, a certain stock’s price increases by more than 100%. It looks very “hot,” but when you truly want to buy or sell, you find that trading gets stuck. This usually signals that the stock has been added to the disposal list.

In simple terms, stock disposal happens when trading becomes abnormal—for example, when the short-term price rise/fall percentage is too large, the turnover rate surges, or the trading volume is abnormally inflated. In Taiwan, the Taiwan Stock Exchange will put such stocks on a special watch list. The goal is very clear: to cool down the market and help investors calm down.

These disposed stocks go through several stages. First, they’re listed as “Attention Stocks.” At this point, trading isn’t restricted yet; it’s only a reminder to investors to pay attention. But if the abnormal situation continues, the stock is upgraded to a “Warning Stock,” and finally ends up as a “Disposal Stock.” Once it enters the disposal stage, trading is truly restricted.

How strict are the restrictions? During the first disposal, a stock can be matched only once every 5 minutes. If buy and sell amounts exceed a certain threshold, investors must pay the full amount of the share funds in advance, and financing and securities lending are also suspended. If the situation doesn’t improve, the second disposal is even worse: matching becomes once every 20 minutes, and all trades must have their settlement funds set aside (escrowed/segregated) in advance. That’s also why some people jokingly refer to disposal stocks as being “imprisoned” or “locked up.”

So, can you still trade during the stock disposal period? You can, but it’s very inconvenient. Liquidity drops significantly, and trading volume often shrinks. For people who do short-term trading, it’s basically a nightmare. But it also brings another kind of opportunity—because trading is restricted, the supply/demand of shares tends to be relatively stable, and the direction of major funds becomes clearer.

As for whether a stock will rise after stock disposal, there’s a saying in the market: “the more tightly locked it is, the bigger the tail.” Some disposed stocks do accumulate strength during the restricted period, then surge again once the restrictions are lifted. For example, after Wei-Feng Electronic entered the disposal stage, its share price continued to rise, climbing by 24%. But there are also negative cases: after Yang Ming was listed as a disposal stock, not long after it was placed into disposal again due to the magnitude of its decline being too large, and afterward the stock’s performance was quite sluggish.

So, the key to investing in disposal stocks still comes back to the company itself. Stock disposal is only a type of abnormal trading condition; it doesn’t indicate whether the company’s quality is good or bad. If, after researching, you believe the company still has investment value, the disposal period may actually be a chance to step in. The standard for judgment is the same as for normal stocks—look at fundamentals (business, financial statements, profitability) and the share/funds side (where the money flows).

That said, it’s important to remind you that the risks of disposal stocks are indeed higher. Abnormal trading before the disposal may reflect underlying problems, so you should be cautious with long-term holding. Also, if the stock starts to fall sharply during the disposal period, it’s best to avoid it. At the same time, confirm whether the stock’s valuation is reasonable; if it truly is undervalued, entering during the disposal period and waiting for it to rise is also an approach.

For short-term traders, stock disposal has a big impact because they can’t do intraday margin trading. But for long-term holders, the impact of trading restrictions is less severe—and it may even allow them to see updates to the company’s financial reports more promptly. In the end, you still need to decide based on your investment goals and your risk tolerance.