Why do stock orders succeed but not execute when hitting the daily limit up/down? The trading truths investors must understand

Have you ever encountered situations like these: placing an order to buy when a stock hits the limit-up, seeming to successfully place the order, but never getting a fill? Or rushing to sell when a stock hits the limit-down, orders sent but no counterpart willing to take the other side? This is actually one of the most confusing aspects of the stock market and a common reason many novice investors suffer losses.

First, Understand the Rules: What Are Limit-Up and Limit-Down?

Limit-Up refers to the maximum price increase a stock can reach within a trading day. In Taiwan’s stock market, the regulation states that the price change cannot exceed 10% of the previous trading day’s closing price. For example, if TSMC closed at NT$600 yesterday, the maximum price today is NT$660, which is the limit-up price.

Limit-Down is the opposite. The lowest price a stock can fall to in a day is NT$540 if the previous close was NT$600, making NT$540 the limit-down price. Once the stock hits these extreme prices, the market will show a one-sided order book—buying frenzy at limit-up or selling pressure at limit-down.

On the trading screen, limit-up stocks are usually marked in red, limit-down stocks in green, and the price chart will show a flat horizontal line, indicating no movement.

Why Do Orders Get Placed Successfully but Not Filled? Understanding the Truth Behind Limit-Up/Limit-Down Buying and Selling

The Dilemma of Buying and Selling at Limit-Up

When a stock hits the limit-up, you can indeed place an order, but whether it gets filled depends on other factors.

If you place a sell order, congratulations, because at this time, the number of buyers far exceeds sellers, and your order will almost immediately be filled. But if you place a buy order, you’ll need to wait in line. During limit-up, many buy orders are already queued at the limit-up price. Unless the stock price drops, your order will never reach the front of the line. This is a common scenario where orders are successfully placed but not executed.

The Reverse Dilemma at Limit-Down

The situation is opposite at limit-down. Many want to sell, but few want to buy.

If you place a buy order, the chances of execution are high because many sell orders are waiting. But if you place a sell order, you need to queue up, as the limit-down price is filled with unfilled sell orders. Again, orders are successfully placed but not filled.

This phenomenon reflects a harsh truth in the market: at limit-up and limit-down, the market has already formed a one-sided trend, losing the normal supply and demand balance.

Why Do Stocks Hit Limit-Up or Limit-Down? The Underlying Drivers

The Four Main Causes of Limit-Up

1. Catalysts of Major Positive News

Strong earnings reports, revenue surges, large orders—these can ignite buying enthusiasm. When TSMC receives big orders from Apple or NVIDIA, it often hits the limit-up. Government policies favoring green energy or electric vehicles can have the same effect; once such policies are announced, related stocks are flooded with capital and hit the limit-up.

2. Short-term Market Speculation on Themes

AI concept stocks surge due to increased server demand, biotech stocks are continuously hot. During quarter-end performance boosting, fund managers and major players target small- and mid-cap electronics stocks like IC design firms to boost performance, often pushing them to limit-up with a single move.

3. Technical Breakout Signals

When a stock price breaks through a long-term consolidation zone with increased volume, or when high short interest triggers short covering, it attracts chasing buyers, locking the price at the limit-up.

4. Major Players and Large Investors Locking in Chips

When foreign investors and fund managers continuously buy large amounts, or major players lock in chips of small- and mid-cap stocks, there are no available stocks to sell. The stock price is pushed to the limit-up, and retail investors cannot buy.

The Four Main Causes of Limit-Down

1. Impact of Negative News

Earnings disappointments (losses widen, gross margin declines), company scandals (financial fraud, executives involved), or industry downturns can trigger panic selling, making limit-down inevitable.

2. Chain Reaction from Systemic Risks

Major events like COVID-19, the US stock market crash cause panic among retail investors. When TSMC’s ADR plunges, Taiwanese tech stocks are often also sold down to limit-down.

3. Major Players Offloading and Margin Calls

Major players may inflate prices then dump holdings; retail investors get trapped. If margin calls are triggered, selling pressure surges—similar to the shipping stock crash in 2021, where many retail investors couldn’t escape in time.

4. Technical Breakdown and Panic Selling

When stock prices break below key support levels like the monthly or quarterly moving averages, or suddenly spike in black candles with high volume (a possible sign of major players offloading), stop-loss selling intensifies, ultimately pushing the stock to limit-down.

Taiwan Stock Market vs. US Stock Market: Different Market Mechanisms

Taiwan’s stock market has limit-up and limit-down mechanisms, but the US market does not. The US uses circuit breakers (also called automatic trading halts). When prices fluctuate too wildly, trading is temporarily halted to cool down the market.

Market Circuit Breakers: If the S&P 500 drops more than 7% or 13%, the entire market pauses for 15 minutes; if it drops 20%, trading halts for the day.

Single Stock Circuit Breakers: If a stock moves more than 5% within 15 seconds, trading is suspended temporarily.

Practical Strategies When Facing Limit-Up / Limit-Down

Step 1: Rational Analysis—Don’t Let Emotions Drive You

When encountering limit-up or limit-down, beginners often make the mistake of blindly chasing or panic selling. The correct approach is to first understand why the stock hit the limit.

If it’s a limit-down but the company has no fundamental issues, just market sentiment or short-term factors dragging it down, a rebound is likely. In such cases, holding or small-scale accumulation is advisable.

If it’s a limit-up, don’t rush to follow. Confirm whether there are solid major positive reasons supporting the continued rise. If unsure, it’s better to wait and see.

Step 2: Indirect Strategies—Trade Related Stocks

When a leading stock hits limit-up due to positive news, its upstream and downstream suppliers or similar stocks often benefit. For example, if TSMC hits limit-up, other semiconductor stocks may also rise. You can look for entry opportunities among related stocks.

Some Taiwan stocks listed in the US (like TSMC TSM) can be traded via cross-border or overseas brokers, providing more flexibility under US market’s circuit breaker mechanism.

Step 3: Be Patient—Wait for Breakouts or Breakdowns

When a stock hits limit-up, don’t buy impulsively. Wait for the price to dip a few levels or observe the next day’s opening to judge. At limit-down, don’t rush to buy the dip; wait for signs of rebound. Placing an order immediately may not get filled. Waiting for a more favorable moment is better.

The key is: Recognize that extreme market states are temporary. Don’t let unfilled orders trap your judgment and capital.