Why can't you sell when a stock hits the limit down? Hidden games in the stock market revealed through limit-up and limit-down movements

The two most frustrating words in the stock market are Limit Up and Limit Down. When there’s a limit up, you can’t buy; when there’s a limit down, you can’t sell—what secrets are hidden behind these mechanisms?

What Are Limit Up and Limit Down Essentially?

Limit Up means the stock price has reached the ceiling set by the exchange and cannot go higher. Limit Down is the opposite: the stock price has hit the floor price and cannot fall further. This isn’t the exchange trying to make things difficult for investors; it’s a risk control mechanism.

Taking the Taiwan stock market as an example, the daily price change limit is restricted to 10% of the previous day’s closing price. If a stock closed at 660 NT dollars yesterday, today the maximum is 726 NT dollars, and the minimum is 594 NT dollars. Exceeding this range? Sorry, the price is frozen until the next trading day, when it can fluctuate again.

Why Can’t You Buy During Limit Up and Sell During Limit Down?

Open your stock trading app, and you’ll see the order book for limit-up stocks showing: Buy orders pile up like mountains, while sell orders are almost zero. What does this mean? Many buyers are waiting at the limit-up price to execute trades, but no one is willing to sell. When it’s your turn to place a buy order, you’ll have to queue—there are thousands or even tens of thousands of orders ahead of you. Will you get filled? Basically, unlikely.

Conversely, if you place a sell order at this moment, the counterparty will execute instantly—because so many want to buy this stock, transactions happen in minutes.

The logic of Limit Down is completely reversed. The market is full of sellers, and buy orders are virtually nonexistent. Want to sell? No one wants to buy. You place a sell order and wait in line—thousands of orders waiting to be filled at the limit-down price. But if you want to buy the dip now, sorry, you’ll also have to queue because there are too many sellers.

In simple terms: When prices are frozen, whether your order gets filled depends entirely on whether someone on the other side of the market is willing to take the opposite position.

Different Markets Have Different Risk Control Strategies

The Taiwan and Hong Kong markets operate differently. Hong Kong stocks have no limit-up or limit-down restrictions, so prices can rise or fall as much as traders want. But Hong Kong has a “Trading Halt” mechanism—if the overall market or a particular stock moves too violently, the Hong Kong Stock Exchange will force a pause.

The US stock market also has no limit-up or limit-down, but it employs a “circuit breaker” system. If the S&P 500 drops 7%, trading pauses for 15 minutes; if it drops 13%, another 15-minute halt; at 20% decline, the market closes for the day. Individual stocks also have circuit breakers—for example, if a stock’s price moves more than 5% within 15 seconds, trading for that stock is frozen for 5 minutes. This is to prevent emotional trading from triggering a cascade of panic.

In other words, different markets handle extreme volatility differently, but the goal is the same: to give investors time to cool off and prevent market crashes.

What Should You Do When Facing Limit Up or Limit Down?

First misconception: Don’t blindly chase or panic sell.

When you see a stock hit the limit down, beginners often react with “It’s over, sell immediately!” But hold on—ask yourself: Is there something fundamentally wrong with this company? Is its fundamentals completely rotten? Or is it just market sentiment being overly negative, dragging the stock down temporarily?

If it’s the latter, the limit down might actually be an opportunity. Historically, many stocks that hit the “bottom” of their limit down have rebounded significantly afterward. At this point, the strategy isn’t to run away but to hold or add small positions. Conversely, when you see a limit-up, don’t rush to chase—analyze whether this surge can sustain or if it will pull back tomorrow.

Second tip: Trade related stocks or diversify into other markets.

If a leading stock hits the limit up and you can’t buy, look at its upstream and downstream industries. For example, if a chip industry leader hits the limit up, its suppliers and clients might still have opportunities. Or switch to US stocks or Hong Kong stocks, where there are no limit-up or limit-down restrictions.

Third tip: Use derivatives or contracts to hedge.

The most flexible approach is trading Contracts for Difference (CFDs). CFDs track stock prices but have no limit-up or limit-down restrictions, can be traded 24/7, and offer flexible leverage—ideal for investors wanting to bypass these limits. You can participate in large swings with less capital and set stop-losses at any time.

Final Advice

Limit Up and Limit Down may seem like “troubles” imposed by exchanges, but they are actually protective nets for market stability. Understanding how they work allows you to stay rational during extreme conditions, rather than being driven by emotion. Remember: when prices are frozen, the real test isn’t technical analysis but your mindset and contingency plans.