Buy now and settle later, or settle later and buy? Complete guide to T+0 same-day trading in Taiwan stocks

What is T+0 Day Trading in Stocks?

In the Taiwan stock market, buying and selling stocks on the same day (T+0 trading) is called “Day Trading” or “Intraday Trading.” Simply put, it means completing the buy and sell actions within the same trading day without waiting for the T+2 settlement system’s next-day settlement.

Many investors choose day trading because the traditional T+2 system requires holding stocks overnight, which exposes them to risks from overnight black swan events. Day trading allows traders to exit immediately when they realize a mistake, quickly cut losses, and avoid overnight risks.

Since Taiwan opened up spot stock day trading in 2014, this trading method has become increasingly popular. According to exchange statistics, day trading accounts for nearly 40% of total Taiwan stock market volume, with the number of participants growing year by year.

What are the Differences Between the Two Types of Day Trading?

Spot Stock Day Trading: Using own funds to trade within the day

Spot stock day trading refers to investors using their own capital to buy and sell within the same trading day (or sell first and buy later), involving no borrowing.

Account Opening Requirements:

• Opened with a broker for at least 3 months (can accumulate trading records across multiple brokers)
• At least 10 completed buy/sell transactions in the past year
• Signed risk disclosure and day trading agreement

Fee Structure:

• Securities transaction tax: 0.15%
• Commission (buy/sell): 0.1425%

Logic of Buying First and Then Day Trading:

• Bullish view: buy today → sell today (long position)
• Bearish view: sell today → buy today (short position)

Margin Trading and Short Selling: Borrowing money or stocks from brokers

Margin trading involves borrowing funds (margin financing) or stocks (short selling) from brokers to trade, which incurs higher costs but offers greater leverage.

Account Opening Requirements:

• Opened with a broker for at least 3 months
• At least 10 buy/sell transactions in the past year
• Trading amount over NT$250,000 in the past year
• Must open a separate margin account

Fee Structure:

• Securities transaction tax: 0.3%
• Commission (buy/sell): 0.1425%
• Borrowing interest (average): 0.08%

Margin trading involves buying with leverage or short selling, increasing risk accordingly.

Core Advantages and Risks of Day Trading

Attracting Investors: Advantages

1. No Overnight Holding Risk Traditional overnight holdings risk sudden negative news; day trading completes settlement within the same day, avoiding overnight black swan impacts.

2. Rapid Stop-Loss Mechanism Mistakes can be closed immediately, rather than waiting until the next day, reducing the chance of losses snowballing.

3. High Capital Efficiency Day trading operates on a “buy and sell to settle” system, theoretically allowing multiple trades with limited capital, increasing capital turnover.

4. Suits Short-Term Traders’ Psychology Investors who enjoy quick profits from intraday volatility can fully seize market opportunities.

Hidden Risks and Disadvantages

1. Underestimated Leverage Risks No-capital day trading sounds attractive, but it essentially involves leverage. If judgment is wrong, losses are amplified, and insufficient funds may lead to default and huge debts.

2. Erosion of Profits by Costs Frequent trading for short-term gains accumulates fees, transaction taxes, and borrowing costs, which can eat into most profits. Especially in margin trading, costs are significantly higher than spot trading.

3. Requires Long Hours of Monitoring Day traders must watch the market constantly, monitoring price movements, market trends, capital flow, and news, far exceeding swing trading effort.

4. Difficult to Execute Take-Profit and Stop-Loss In practice, traders often close positions too early due to leverage pressure or delay stops, resulting in large losses and minimal gains.

5. Market Volatility Is Unpredictable Even fundamentally strong stocks may open high and fall or open low and rise during the day; day trading requires making decisions within minutes of volatility.

Other Financial Products Suitable for Same-Day Trading

Taiwan’s investment market not only includes stocks and margin trading for day trading but also various derivatives inherently designed for T+0 trading.

Futures: Typical leverage and two-way trading

Features:

• Naturally T+0, can buy and sell within the same day
• Main features are leverage and two-way trading (long or short)
• Must be traded on futures exchanges, with expiration dates

Account Opening Requirements:

• Sufficient margin deposit (usually tens of thousands NT$)
• Traded in lots (“contracts”)

Costs:

• Transaction tax: 0.0002 (2 per 10,000)
• Commission: around NT$30 (varies by underlying)

Risk Characteristics: Futures markets are highly speculative; about 96% of participants are speculators. High leverage means very high risk.

Options: Small capital leverage tools

Features:

• Derived from futures concepts
• Holders have the right to buy or sell an asset within a specified time, but are not obligated
• Inherently T+0

Account Opening Requirements:

• Pay a small premium (a few thousand NT$), much lower than futures
• Traded in lots (“contracts”)

Costs:

• Transaction tax: 0.001 (1 per 1,000)
• Commission: around NT$10+ per trade

Risk Characteristics: Buyers’ risk is limited to the premium paid; sellers face unlimited risk. Not suitable for beginners.

CFD(: The lowest threshold T+0 trading

Features:

• Clients sign contracts with brokers, paying margin to trade
• Essentially OTC (over-the-counter), investors do not own the underlying asset
• Wide trading scope (forex, gold, stock indices, individual stocks, crude oil, cryptocurrencies, etc.)
• Naturally T+0, no expiration settlement

Account Opening Requirements:

• Lowest threshold (tens to hundreds of USD)
• Can apply online directly with CFD brokers

Costs:

• Mainly from spreads (difference between buy and sell prices)
• Transparent, no hidden fees

Risk Characteristics: Leverage risk is high, but due to low entry barriers, attractive to small-capital investors. Suitable for short-term swing trading, but stop-loss is essential.

Comprehensive Comparison of the Five Daily Trading Methods

Practical Operation Process of Day Trading

Regardless of the chosen method, the basic logic remains consistent:

Step 1: Confirm Trading Timing Analyze short-term price trends or underlying assets to identify intraday opportunities. Optimal times are usually after market open, before close, or during major news releases, when volatility is higher.

Step 2: Decide Trading Direction

• Bullish: buy first, sell later
• Bearish: sell first, buy later

Step 3: Set Risk Controls Before placing orders, set stop-loss points. For example, close the position automatically if loss exceeds 1%, to prevent larger losses.

Step 4: Execute and Close Positions Based on market movements and pre-set profit or stop-loss targets, close positions timely. Avoid emotional trading or overholding.

Step 5: Review Trading Costs Evaluate the transaction fees, taxes, and borrowing costs to ensure net profit covers costs.

Frequently Asked Questions

Q1: Can odd-lot stocks be day traded?
A: No. Odd-lot trading in Taiwan does not support credit trading; they can only be sold the next day, so day trading is not possible.

Q2: Which stocks are eligible for day trading?
A: Currently, Taiwan allows day trading on Taiwan 50 index stocks, Mid-Cap 100 index stocks, and GreTai 50 index stocks, totaling about 200 stocks. Not all listed stocks are eligible.

Q3: Are there special rules for US stock day trading?
A: Yes. For regular US brokerage accounts, the number of day trades within 5 days cannot exceed 3 unless the account balance exceeds US$25,000. Accounts below US$25,000 are restricted from frequent day trading and may be frozen for 90 days.

Q4: When is the best time during the day to day trade?
A: During high-activity periods: the first 30 minutes after market open (high volatility), midday, the last hour before close, or during major news events, when trading volume and volatility are higher, offering more opportunities.

Summary

Day trading stocks within the same day is a legitimate and widely used trading approach, but not suitable for all investors. Spot stock day trading has relatively low costs and is suitable for those with genuine funds and strong risk tolerance; margin day trading involves higher costs and leverage, thus higher risk.

Before engaging in day trading, investors must honestly assess:

• Do they have sufficient capital (to avoid default from no-capital day trading)?
• Can they monitor the market continuously and make quick decisions?
• Can they handle high-frequency costs associated with short-term trading?
• Do they possess risk management skills and psychological resilience?

If these conditions are not met, swing trading or long-term investing may be more practical. Day trading is not a “no-capital business”; leverage risks always exist. Blindly following the trend only accelerates capital depletion.