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.