Coastal freak waves are dangerous to people, ships and buildings in the coastal zone. Their mechanism thus is a very important issue. In this study, the data of around eight million waves collected by Harbor and Marine Technology Center in Taichung are analyzed. The statistical analysis shows that the occurrence probability of freak wave is lower than Rayleigh¡¦s distribution. The corresponding sea-state parameters show freak waves tend to occur more frequently when the nonlinearity are higher, the wave groupiness are higher, or the FFT spectrum from wave records are more narrow-banded. HHT analysis shows wave superposition and wave nonlinearity are both possible mechanisms. Freak waves propagating from a wave source are also simulated based on the linear dispersion relation. In half of the simulations, the maximum wave height decreases to only 70% of the original value.