On the Shanghai Stock Exchange, the trading day begins with little fanfare. As a small cluster of clerks shuffle around the mostly empty trading floor sipping glass mugs of tea, large L.C.D. boards flicker to life, displaying in green and red the movements of China's bellwether stock indexes.

Until Thursday, there was likely to be a lot more red than green. Shanghai, Asia's top-performing market last year and long a source of quick riches for investors and speculators, is on track to deliver the region's biggest losses for 2008—down more than 30 percent. And while the Chinese market's explosive growth in recent years—the S.S.E. A Share Index soared some 300 percent in only two years before stumbling last fall—made hundreds of thousands of Chinese citizens wealthy on paper, its subsequent losses are likely to make many more poor in reality.

On Thursday morning, though, China’s main stock index soared nearly 8 percent after the government cut an unpopular trading tax, a move that had market pros predicting the end of the six-month bear market. Shanghai stocks finished the week up 15 percent.

"In New York, people talk about [the terrorist attacks of] 9/11. In China, the date on everyone's mind is 5/30," says William Zheng, a Shanghai-based partner with Boston law firm Sheppard Mullin Richter & Hampton. Zheng is referring to the day on which Chinese authorities, concerned by the speculative frenzy in the nation’s markets, tripled the tax charged on stock trading in an attempt to curb what it feared was a bubble taking shape.

The result? The Shanghai index plunged 6.5 percent—in a single day. "Until then, the market had gone almost straight up," Zheng says. True, the market rebounded briefly to set new highs by midsummer, but the events of May 30, 2007, proved to be an early warning sign for those prepared to heed it. "It was the day the world changed for Chinese investors, when they realized that stocks could go down as well as up."

Despite the violent swing, an odd assortment of housewives, students, and senior citizens flock to brokerage-company offices, where, in private rooms reserved for clients, they hunker down in front of computers to trade or just sit and watch the action on trading screens.

China's domestic stock market—the A shares of Chinese companies traded in Shanghai and also on other exchanges such as that in Shenzhen, in the Guangdong province—is very much characterized by a kind of quirky combination of naïveté and fear.

Many investors poured their family nest eggs into stocks selected almost at random, perhaps because of a tip from a friend of a friend, or perhaps only because they thought the stock's price was a lucky number. Some have even mortgaged their homes to have capital to invest.

Those investors include Zheng's friends and members of his Shanghai-born wife's family. Zheng and his wife, exhausted by the emotional roller coaster, pulled their money out of the market last year. Many of their friends, however, refuse to cut their losses.

"I think there is something in the Chinese culture or personality—we don't like to sell our possessions. We have an emotional connection to them," Zheng posits. For one of Zheng's friends, that emotional tie has produced losses of 200,000 yuan—so far. (That's $28,600—several times the average annual income of an urban resident of China.)

Mark Mobius, a portfolio manager with Franklin Templeton Investments and the dean of emerging-markets investors, began buying Chinese stocks early this decade. He says that battling human nature is going to be tough—especially in China, where the citizenry has a passion for gambling and little knowledge of the way stock markets work.

"The Chinese government could see this becoming a kind of gambling den, so for the last few years they've made developing an institutional market a priority," Mobius says.

Just how painful is China's volatility? Single-day moves of 2 percent or more—the kind of loss seen on April 17, when stocks hit their lowest level in nearly a year—are perceived as normal. On one memorable day in February 2007, the Chinese market slumped nearly 10 percent. Last week, the tax cut pushed Shanghai stocks up 15 percent.

Meanwhile, Rob Lutts, president and chief investment officer of Cabot Money Management, an investment firm based in Salem, Massachusetts, keeps as much as 10 percent of his wealthy clients' assets in Chinese stocks. One of his biggest holdings is China Finance Online, a Beijing-based company offering—more than a bit ironically—trading data and information packages to individual investors.

Even as the stock market soured in the fourth quarter of 2007, the company reported a 24 percent leap in subscribers, some paying up to $45 a month for its Tao of Wealth package.

"People are learning, slowly, that investing is a trickier business and not always a quick path to riches. And that's a bumpy process—but that is good for this company," Lutts argues. "Learning about corrections is part of the process. There is no way back: China's citizens are becoming investors."