In-Depth Analysis of Disposal Stocks | Are Trading Restrictions Still Opportunities? Understand Key Differences in Day Trading, Margin Trading, and More in One Article

You may have seen this phenomenon in the stock market: a certain stock surges over 100% in just one month, making it very tempting. However, suddenly you find that you can’t execute trades as quickly as usual, day trading is disabled, and margin trading and short selling are also suspended. At this point, you should be alert—this stock is very likely to have entered the Disposal Stock list.

So, what exactly are Disposal Stocks? Why are there trading restrictions? Most importantly, do they still have investment value? This article will comprehensively analyze the investment logic behind Disposal Stocks.

From Abnormal Trading to Disposal Stocks: Taiwan Stock Exchange’s Three-Level Warning Mechanism

The Taiwan Stock Exchange manages stocks with abnormal trading through three stages: Attention Stocks → Warning Stocks → Disposal Stocks.

When a stock exhibits the following conditions in a short period, it will first be classified as an Attention Stock:

• Price increase of over 100% within 30 trading days
• Daily turnover rate exceeding 10%
• Abnormal trading volume amplification over the past 6 days

Importantly, trading of Attention Stocks is completely unrestricted, with buy and sell methods identical to normal stocks, only accompanied by risk warnings to investors.

However, if the stock continues to perform abnormally during the Attention Stock period (e.g., reaching Attention Stock standards or triggering warning conditions for 3 to 5 consecutive trading days), the exchange will take measures—upgrading it to a Disposal Stock. At this stage, trading restrictions are actually enforced.

How Strict Are the Trading Restrictions for Disposal Stocks? The Impact on Day Traders Is Greatest

Disposal Stocks are divided into two stages, with restrictions escalating step by step:

First Disposal

• Matching time: every 5 minutes (not real-time trading)
• Margin deposit requirement: full payment required for single transactions over 10 lots or cumulative over 30 lots; T+2 delayed payment is not available
• Margin trading and short selling: suspended
• Day trading restrictions: day trading is prohibited

Second Disposal (if abnormal standards are triggered again within 30 days)

• Matching time: extended to every 20 minutes
• Margin deposit requirement: all trades, regardless of volume, must be fully paid upfront
• Margin trading and short selling: still suspended
• Day trading restrictions: completely prohibited

The purpose of these restrictions is clear—by reducing liquidity and increasing transaction costs, they aim to curb excessive speculation. For short-term traders who rely on intraday trading, the ban on day trading effectively removes their main profit channel.

Comparative Analysis: Disposal Stocks vs Normal Stocks vs Attention Stocks

Once a stock becomes a Disposal Stock, trading is usually restricted for 10 trading days. If during this period, intraday buy-sell volume exceeds 60%, the restriction period extends to 12 trading days.

Practical Cases: Same Disposal Stock, Very Different Outcomes

Case 1: Weifu Electronics (6756)—Gaining More as Restrictions Tighten

In June 2021, Weifu Electronics was classified as a first-stage Disposal Stock due to excessive gains. Despite restrictions, the stock continued to heat up, and later entered second-stage disposal. During the restricted period, the stock price increased by a total of 24%, allowing investors to experience the market phenomenon of “the more restrictions, the bigger the tail.”

The logic behind this is: restrictions filter out long-term investors who truly believe in the stock, locking in retail chips. After restrictions are lifted, this can create new upward momentum.

Case 2: Yang Ming (2609)—Starts Falling Immediately After Entry

At the same time, Yang Ming also entered the Disposal Stock list due to excessive gains. But it didn’t last long—soon after, due to “over 6 days of cumulative decline,” it was reclassified as a Disposal Stock again. Subsequently, its price remained sluggish, trapping investors.

The difference between these cases is: the first’s rise was supported by fundamentals, while the second was purely speculative overreach.

Can You Still Buy Disposal Stocks? Investment Value Judgment Framework

Yes, but with principles.

Disposal Stocks are essentially a temporary abnormal trading state and do not indicate operational problems. Whether they are worth investing in should be judged using the same framework as normal stocks:

Fundamental Analysis

• Is the company’s core business competitive and stable?
• Are financial indicators healthy (revenue growth, gross margin, net profit)?
• Are there any major risk events?

Chip/Ownership Analysis

• How are major funds entering or exiting during the disposal period?
• Since margin trading and short selling are suspended, fund movements are more transparent, making it easier to gauge institutional intentions.
• Look for signs of continuous buying or selling for cut losses.

Important Tips:

• Confirm whether the stock price is consolidating sideways during the disposal period; if it starts to decline sharply, avoid.
• Assess whether the current valuation is reasonable; only consider buying if undervalued.
• Reserve sufficient liquidity, as transactions may take longer to complete.

Are Disposal Stocks Suitable for Long-term Holding?

It depends on three factors:

1. Company Fundamentals
Disposal Stocks carry higher risks than normal stocks. Abnormal trading may reflect operational issues, financial risks, or major unexpected events. If fundamentals are flawed, long-term holding is risky.

2. Market Environment
In a bear market, Disposal Stocks face greater downside risk; in a bull market, they may rebound sharply after restrictions are lifted.

3. Investor Risk Tolerance
Short-term traders suffer the most—day trading bans cut off profit avenues. But for long-term investors who can tolerate volatility, trading restrictions can help clarify ownership structures and better assess future trends.

Conclusion: If you have confidence in the company’s prospects, temporary restrictions on Disposal Stocks are less concerning. Conversely, even normal stocks should be approached cautiously if not fundamentally sound.