Can you buy when a stock hits the daily limit and is locked? Understanding the trading mechanism is essential before making a move.

What Exactly Are Limit Up and Limit Down?

Many novice investors feel lost the first time they see a stock hit the limit up or limit down. In fact, both phenomena are easy to understand—limit up and limit down essentially mean that the stock price has reached the maximum or minimum fluctuation allowed for the day, indicating an extreme imbalance of buying and selling in the market.

Under Taiwan’s stock market rules, the daily price change limit for any listed or OTC stock is restricted to within 10% of the previous day’s closing price. In other words, if TSMC closed at NT$600 yesterday, today’s maximum price can only rise to NT$660 (limit up), and the minimum can only fall to NT$540 (limit down). Once these price limits are reached, the stock will be “locked” at that level, and the price chart will become a straight line.

Tips for Quickly Identifying Limit Up or Limit Down

On the trading screen, stocks at limit up are marked with a red background, while those at limit down are marked with a green background. This design helps investors quickly recognize.

If you look more carefully, you’ll notice that the order book situation at limit up is completely opposite to that at limit down:

Limit up order book characteristics: Buy orders are piled high, while sell orders are almost empty. There are far more buyers than sellers, which keeps the price locked at the highest point.

Limit down order book characteristics: Sell orders are piled high, while buy orders are almost nonexistent. Many traders want to exit, but few want to buy, so the price is pinned at the lowest point.

Can You Buy When a Stock Is Limit Up? What About When It’s Limit Down?

This is the most common question among investors—the answer is: yes, but with conditions.

Buying at Limit Up

When a stock hits the limit up, you can place a buy order, but be prepared that the trade may not execute immediately. Because many investors are already queued at the limit-up price, your order will just be waiting in line. Unless someone is willing to sell, your order will remain pending.

Conversely, if you place a sell order at limit up, it will almost immediately be executed because there are so many buyers, and your stock will be quickly bought.

Buying at Limit Down

The logic at limit down is completely opposite—your buy order will be executed immediately because many want to sell, and supply is abundant. But placing a sell order at limit down means waiting in line, as many sell orders are piled up at the limit down price.

Why Do Limit Up Occur? The Reasons Are More Than One

Positive News Drives the Rise

When a company suddenly announces impressive financial results, such as quarterly revenue surges, EPS skyrockets, or it receives major orders, the stock price often soars. For example, if TSMC secures large orders from Apple or NVIDIA, it’s easy for the stock to hit the limit up. Government policy benefits can also have the same effect—when the government announces subsidies for green energy or support for electric vehicle industries, related concept stocks are immediately flooded with market capital.

Popular Themes Take Turns

Investors love chasing the hottest concepts. AI stocks surge to limit up due to skyrocketing server demand, biotech stocks are long-term favorites for hype. At the end of each quarter, fund managers and major players often aggressively buy small- and medium-sized electronics stocks (like IC design stocks), and a little spark can send them straight to the limit up.

Technical Breakout Signals

When stock prices break out of long-term consolidation zones with increased trading volume, buying momentum rushes in. High short interest can also trigger short squeeze effects, directly locking the stock price.

Large Investors Lock Chips

When foreign institutional investors and funds continuously buy heavily, or major players tightly lock the chips of small- and medium-cap stocks, there are hardly any stocks left to sell. A quick push can lock the stock at limit up, making it very difficult for retail investors to buy.

Why Does Limit Down Happen? The Warning Signs Are Usually Clear

Negative News Impact

Earnings disappointments are common reasons—widening losses, declining gross margins, and other poor figures. Company scandals (financial fraud, executive involvement) or industry downturns can trigger panic selling.

Systemic Risks Trigger Market Panic

During the COVID-19 outbreak in 2020, many stocks directly hit limit down. A stock market crash in the US can also affect Taiwan stocks; for example, a sharp drop in TSMC ADRs often drags down Taiwanese tech stocks to limit down.

Major Investors Offloading and Trapping Retail Investors

Major players manipulate the stock by first pushing prices up, then selling at high levels, trapping retail investors. Even worse, margin calls—such as the shipping sector crash in 2021—are typical cases. When margin calls are triggered, selling pressure surges, and many retail investors are caught off guard and cannot escape.

Technical Breakdown

Breaking below key support levels like the monthly or quarterly moving averages can trigger stop-loss selling. Sudden high-volume long black candlesticks are clear signals of major players offloading, and a rush of stop-loss orders can easily lead to limit down.

Taiwan Stocks Have Limit Up and Limit Down, But US Stocks Are Different

The US stock market operates under a completely different mechanism—US stocks do not have limit up or limit down restrictions, but they do have “circuit breaker” mechanisms.

The circuit breaker, also called an automatic trading halt, means that when stock prices fluctuate beyond certain thresholds, trading is automatically paused to allow the market to cool down before resuming.

Market-wide Circuit Breaker: When the S&P 500 drops more than 7% or 13%, the entire market pauses for 15 minutes. If the decline reaches 20%, trading is halted for the day.

Single Stock Circuit Breaker: If a stock’s price moves more than a certain percentage (e.g., over 5%) within 15 seconds, trading on that stock is temporarily halted. The specific thresholds vary depending on the stock type.

What To Do When Facing Limit Up or Limit Down? Practical Tips

Step 1: Rational Judgment, Avoid Blindly Chasing Highs or Selling Lows

The most common mistake for beginners is chasing after limit up stocks or selling at limit down. The key is to first understand why the stock is hitting the limit.

If a stock hits limit down but the company has no fundamental issues, just market sentiment or short-term factors, it’s likely to rebound later. In such cases, the best strategy is to hold or add small positions.

Similarly, when a stock hits limit up, don’t rush to buy immediately. First, verify whether there are solid positive catalysts and whether these catalysts can sustain the stock’s upward momentum. If you feel the rally might not last, it’s wiser to wait and see.

Step 2: Indirect Trading—Trade Related Stocks or US Version

When a stock hits limit up due to positive news, consider buying related upstream or downstream companies or peers. For example, if TSMC hits limit up, other semiconductor stocks often move in tandem.

Additionally, many Taiwanese listed companies are also traded in the US. TSMC can be bought on US exchanges under the ticker TSM. If you want to invest, you can use cross-border entrustment or overseas brokers for more flexible and convenient trading.

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