Recently, I often see novice investors ask me a very practical question: if a stock hits the limit down, can you still sell? Especially for day traders, the biggest fear is being unable to sell when the stock is at the limit down—watching the price keep sliding lower but being unable to do anything. Today, let’s talk about this problem that troubles many people.

First, you need to understand what limit up and limit down mean. Simply put, a limit up is when the stock price rises to the daily upper limit, and a limit down is when it falls to the daily lower limit. In Taiwan, regulations require that an individual stock’s maximum daily price movement cannot exceed 10% of the previous day’s closing price. So if TSMC closed at 600 NT dollars yesterday, today its highest price can only reach 660 NT dollars, and its lowest price can only fall to 540 NT dollars.

When you look at the order book, limit-up stocks will be locked with a red background, while limit-down stocks will be locked with a green background, and the price chart will turn into a straight line—completely unmoving. But here’s a key point that many people get wrong: limit up and limit down are not bans on trading; they mean the price is frozen.

When it comes to not being able to sell at the limit down while day trading—that’s exactly the most headache-inducing part. When a stock hits the limit down, there are lots of people who want to sell, but very few who want to buy. If you place a sell order, it may not execute right away, because ahead of you there are already many orders waiting to be matched with selling. However, placing a buy order is more likely to get filled, because buy-side demand is scarce at that time.

So what should you do if you can’t sell at the limit down during day trading? Here are a few practical, hands-on tips. First, once you notice that a stock may be headed toward the limit down, don’t wait until it actually hits the limit down to think about selling—place your sell order as soon as possible during the opening auction. The trading rules are “price priority, time priority.” The earlier you place your order, the higher your place in the queue, and the greater your chance of getting executed. Second, once your order is filled, don’t start canceling orders at random. Many people see that it isn’t filled immediately, get anxious, cancel quickly and re-submit, and end up getting pushed to the very back of the line—making it even harder to get out.

Another trick is to pay attention to the “best bid” order size at the limit-down price. If a large number of buy orders suddenly appears, it may mean major players or large funds are stepping in to take over. At that moment, you can consider selling along with it, but you need to act fast, because the opportunity usually lasts only a few seconds. In addition, many limit-down stocks will see a brief release of liquidity in the final 10 to 15 minutes before the close, as funds move in to pick up bargains—this is also the final timing window to escape that day.

Why do stocks hit the limit down? Usually it’s because of negative news shocks, such as a major earnings report coming with unpleasant surprises, companies running into scandals or operational problems, or an entire industry sliding downward. Sometimes it’s driven by market panic, such as in 2020 during the COVID outbreak, when many stocks simply went flat and hit the limit down directly. Even worse, margin calls can trigger a surge in selling pressure, making it extremely difficult to get out. Technical breakdowns can also lead to limit downs—if the price breaks below key support levels, such as the monthly or quarterly moving averages, stop-loss selling can explode.

On the other hand, limit ups are usually caused by positive news—such as strong earnings, receiving large orders, or government policy benefits. Market funds love to chase hot themes. AI concept stocks and biotech stocks are frequent targets of speculation. During quarter-end window-dressing periods, fund managers and major players often aggressively push small- and mid-cap electronics stocks to boost performance. When technicals turn stronger and shares are locked in by big players, limit ups are also easier to trigger. When foreign investors and institutional investors keep buying heavily, or major players lock up the float extremely tightly, there may be very few stocks available to sell—so once the price is nudged up, it quickly gets locked.

The U.S. market is different. They don’t have a limit-up/limit-down mechanism; instead, they use “circuit breakers” to control volatility. If the S&P 500 index drops by more than 7% or 13%, the entire market pauses for 15 minutes. If it falls by 20%, trading is halted for the day. For individual stocks, circuit breakers apply as well: if a stock’s price moves up or down by more than 5% within 15 seconds, trading in that stock is temporarily suspended for a period of time.

When you encounter a limit up or limit down, the most important thing is to make rational judgments. The most common mistake that beginners make is blindly chasing gains and selling off losses. If a stock hits the limit down, don’t rush to cut your losses. First, find out whether the company itself actually has a problem. If it’s just the result of market sentiment or short-term factors pulling the price down, it may very well rise back later—holding or initiating a small position can actually be the best strategy at times like this. When you see a limit up, don’t rush to chase it either. First, check whether there really is a major positive catalyst strong enough to support the stock price. If you’re not sure, waiting and observing is the safest approach.

Another move is to trade related stocks. When a stock hits the limit up due to positive news, you can consider buying upstream and downstream companies that are closely related to it, or similar stocks in the same sector. For example, if TSMC hits the limit up, other semiconductor stocks typically move along with it. Some Taiwanese stocks are also listed on U.S. exchanges. For instance, you can buy TSMC on the U.S. market. If you want to invest, you can place orders through a broker for overseas securities or an overseas brokerage—this approach is also more flexible.