The 10% Price Limit: How Far a Stock Can Move in a Day
Taiwan stocks can move at most 10% from the previous close each day; at limit-up buy orders queue and at limit-down sell orders queue, so you may not get a fill either way.
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Text version · Taiwan Stock Rules, lesson 2: “The 10% Price Limit: How Far a Stock Can Move in a Day”
Taiwan stocks can move at most 10% from the previous close each day; at limit-up buy orders queue and at limit-down sell orders queue, so you may not get a fill either way.
Up to 10% up or down each day
Taiwan's price limit is ±10% of the previous close. At limit-up, sell orders are scarce and buy orders queue up; at limit-down it's the reverse, and you may not be able to sell.
Rounded inward, never beyond 10%
Limit-up and limit-down prices are rounded inward to the tick size: limit-up down, limit-down up, so the actual band is often a little under 10%.
No limit for new stocks' first 5 days
Newly listed stocks have no price limit for their first 5 trading days (check the exchange's rules), so they can move tens of percent in a day. That's very risky.
Key takeaways
- Limit-up and limit-down prices are ±10% of the previous close, rounded inward to the tick size, so the actual band is often slightly under 10%.
- At limit-up, sell orders are scarce and buy orders queue up; at limit-down it's the reverse, and you may not be able to sell.
- Price limits only spread one big move over several days; they don't change the impact of the news itself.
- Newly listed stocks have no price limit for their first 5 trading days (check the exchange's rules), so swings can be huge.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Previous close NT$57.3: what are today's limit-up and limit-down prices? Is the actual band exactly 10%?
- Drag “News shock” to +30% and press ▶: how many days does the price take to reach fair value?
- Change the news shock to −25%: how many days in a row of limit-down? What problem do sellers run into?
- Set the previous close to about NT$95: the limit-up price lands above NT$100, so what does the tick size become?
Quiz and explanations
- 1. Yesterday's close was NT$57.3. What's today's limit-up price?
- Answer: NT$63.00.57.3 × 1.1 = 63.03; the tick size for NT$50–100 is NT$0.1, so the limit-up price is rounded down to NT$63.0.
- 2. A stock opens at limit-down and many people place sell orders. What happens?
- Answer: Sell orders queue at limit-down, and many don't fill if there aren't enough buyers.The price can't go below limit-down, so sellers queue there waiting for buyers; if there aren't enough buy orders, those further back don't fill.
- 3. Big bad news cuts fair value by 25%. What happens under the ±10% rule?
- Answer: It may need several days of limit-down to reach fair value.A stock can fall only about 10% a day, so big bad news often takes several days of limit-down to work through.
Terms in this lesson
- price limit (Price Limit): Some markets cap how far a stock can move in a day (±10% for most Chinese main-board stocks); hitting the cap is limit-up, hitting the floor is limit-down.
- tick (Tick): The smallest amount a price can move; the value of 1 tick = tick size × contract size.