Recently, I’ve been studying some special phenomena in the Taiwan stock market and found a type of stock called “disposal stocks,” which is quite interesting. In simple terms, these are stocks whose prices swing abnormally in a short period and whose trading volume explodes—stocks that are then blacklisted by the Taiwan Stock Exchange.

These stocks are added to a “special observation list,” and their trading activities are subject to clear restrictions. It’s not that you can’t buy or sell; rather, the matching time changes from being available at any time to occurring once every 5 minutes or every 20 minutes, and you must pay in full in advance. Margin trading and securities lending are not allowed. It sounds like being put “under house arrest,” so investors also jokingly refer to it as “serving jail time.”

What’s interesting is that a stock usually goes through several stages as it moves from normal to abnormal. First, it becomes a “proceeding-to-observe stock” (notice stock). If the problem continues, it is upgraded to a “warning stock” (alert stock). Only after that does it enter the “disposal stock” category. The trading restrictions differ at each stage, but the restrictions for disposal stocks are the strictest. In general, stocks on the disposal list must remain there for 10 business days, during which margin trading and securities lending transactions cannot be conducted.

As for the outlook for trading disposal stocks, I’ve seen quite a few cases. Some stocks, after entering the disposal period, can still rise by 24%, like V-Gen Electronics. But others—for example, Yang Ming—start to fall not long after entering, and then remain weak for a long time. So whether trading disposal stocks can make money ultimately depends on the company itself.

There’s a saying in the market that disposal stocks “grow bigger the more they’re restricted.” It means that after some popular stocks that surged a lot enter the disposal period, the shares stabilize, liquidity is low, and they may rise again after the restrictions are lifted. But this also comes with risks: if bearish forces are involved, investors may not be able to sell even if they want to.

My view is that you shouldn’t look at trading disposal stocks only to see whether they are being restricted; you should look at the company’s fundamentals. If, through research, you determine the company still has investment value, then the status of being a disposal stock is only a temporary abnormal trading condition—it doesn’t mean the company’s quality is poor. From the fundamentals side, look at business competitiveness, financial indicators, and profitability; from the “chip” (order-flow/share-structure) side, look at where the capital is flowing. That kind of judgment is more reliable.

A special reminder: before buying, confirm whether the stock price is moving sideways and consolidating during the disposal period. If it starts to drop sharply, it’s best to avoid it. Also, check whether the current valuation is reasonable. If you believe the stock is undervalued, you could consider entering during the disposal period and wait for future upside opportunities.

For long-term investors, restrictions on buying and selling disposal stocks have little impact, because they generally don’t do day trading. On the other hand, because regulators require companies to regularly publish financial reports, investors can understand the company’s operating situation more promptly. But if you’re a short-term trader, these restrictions will clearly increase trading costs—so think through your investment style before deciding.