Comprehensive Analysis of Day Trading: T+0 Buying and Selling Strategies and Spot Trading Risk Assessment

What is Same-Day Trading? The Core Logic of Intraday Buying and Selling

Stocks can be bought and sold on the same day, a practice known in the industry as T+0 trading, commonly referred to as【Day Trading】. Taiwan’s stock market originally followed a T+2 settlement system (settlement occurs two days after purchase), but investors have enabled a Same-Day Trading method through broker margin and securities lending services.

Simply put, Same-Day Trading means completing both buy and sell transactions within the same trading day, settling all trades on the same day. For example, an investor buys TSMC (TSM) at 9:15 AM and sells at 2:30 PM, earning the price difference. For brokers, this involves executing equal lots of buy and sell transactions, but they can additionally charge margin interest and transaction fees.

Since Taiwan’s stock market opened to intraday day trading in 2014, the volume of day trades has accounted for nearly 40% of total market turnover, with participant numbers increasing year by year.

Cash-Based Day Trading vs Margin-Based Day Trading: The Differences Between Two Same-Day Trading Methods

Cash-Based Day Trading: Using Own Funds for Same-Day Transactions

Cash-Based Day Trading refers to investors directly using their own funds to buy and sell stocks within the same day. This method is straightforward and does not require borrowing money or stocks from brokers.

Operational Approach:

• Bullish: Buy stocks with cash → Sell stocks with cash
• Bearish: Sell stocks with cash → Buy stocks with cash

Account Opening Requirements:

1. Broker account open for at least 3 months (can be across different brokers)
2. At least 10 completed buy/sell transactions in the past year
3. Sign risk disclosure and intraday offset agreement

Transaction Costs:

• Stamp Tax: 0.15%
• Transaction Fee (buy/sell): 0.1425%

Margin-Based Day Trading: Borrowing Money or Stocks from Brokers for Transactions

Margin-Based Day Trading involves investors obtaining financing (borrowing money) or securities (borrowing stocks) from brokers to execute intraday trades. Buying on margin and then short selling, or short selling and then buying on margin, are included in this category.

Operational Approach:

• Bullish: Margin buy → Short sell
• Bearish: Short sell → Margin buy

Account Opening Requirements:

1. Broker account open for at least 3 months (can be across different brokers)
2. At least 10 completed buy/sell transactions in the past year
3. Trading amount over NT$250,000 in the past year
4. Credit account setup required

Transaction Costs (Relatively Higher):

• Stamp Tax: 0.3%
• Transaction Fee: 0.1425%
• Average Interest Rate on Borrowed Funds: 0.08%

Core Advantages of Same-Day Trading

Immediate Exit, Flexible Stop-Loss — Investors can close positions without waiting until the next day. When market judgment is wrong, they can stop losses immediately, avoiding potential large overnight losses.

Relatively Low Cost — Compared to long-term holding or leveraged derivatives, day trading typically only incurs straightforward fees and taxes, without involving interest on borrowed funds (in cash-based day trading).

Avoid Overnight Risks — If investors place wrong orders or misjudge the market, traditional trading requires waiting until the next day to sell, risking significant losses. Day trading allows quick adjustments within the same day.

Quickly Capture Volatility — Certain stocks (especially tech stocks or small caps) can fluctuate wildly during trading hours, enabling day traders to profit rapidly within short periods.

Risks and Pitfalls of Same-Day Trading

Capital Requirements and Leverage Risks

One reason many investors are attracted to day trading is the so-called “no-capital” day trading, which essentially involves leverage. This increases risk as well. Traders lacking sufficient funds often have limited risk tolerance; if investments fail or defaults occur, they may face huge debts.

Excessive Leverage Leading to Larger Losses

Investors often use leverage beyond their capacity, and when the market moves against them, they may fail to cut losses in time, resulting in substantial losses; when correct, they may prematurely take profits due to leverage pressure, ultimately leading to a “small profit, big loss” scenario.

Transaction Costs Eating Into Profits

Day trading involves paying stamp tax, transaction fees, and for margin trading, interest costs. If each trade yields only a small profit, these costs can wipe out gains. Short-term traders should be especially cautious about transaction costs eroding profits.

Time and Energy Consumption

Day trading occurs within the same day; even with fundamentally strong stocks that generally rise over the long term, intraday prices can open high and fall, or open low and rise. Day traders must constantly monitor individual stocks, market movements, related sectors, order flow, and real-time news, making it far more complex than swing trading.

Price Fluctuations Leading to Holding Risks

If intraday price swings exceed expectations, investors may be unable to sell at desired times, resulting in holding positions until market close, which prevents same-day settlement.

Comparison with Other Financial Products That Support Same-Day Trading

Taiwan’s stock day trading is realized through margin and securities lending mechanisms, with relatively high transaction costs. In contrast, some financial products are inherently T+0:

Futures

Futures markets naturally support same-day buying and selling without special arrangements. Futures are characterized by high leverage and flexible two-way trading, but also carry higher risks.

Account Opening: Requires tens of thousands of NT dollars in margin Transaction Costs: 0.02% trading tax, approximately NT$30 per trade

Options

Options are derivatives based on futures, giving holders the right (but not obligation) to buy or sell securities at a specified price within a certain period. They can choose to exercise or abandon, with limited risk.

Account Opening: Only a small premium (a few thousand NT dollars) Transaction Costs: 0.1% trading tax, about NT$10+ per trade

CFDs (Contracts for Difference)

CFDs are OTC derivatives with a broad range of underlying assets (Forex, gold, stocks, oil, cryptocurrencies, etc.), with minimal entry barriers.

Account Opening: Usually no minimum (tens to hundreds of USD) Transaction Costs: Calculated based on spreads

Comparison Table of Trading Instruments

Common Questions About Day Trading

Q1: Can odd-lot stocks be traded on the same day?

No. Odd-lot stocks do not support credit trading and cannot be sold on the same day. This applies both during trading hours and after hours.

Q2: Which stocks are eligible for day trading?

Currently, Taiwan stocks eligible for day trading include:

• Taiwan 50 Index components
• Mid-cap 100 Index components
• OTC Taiwan Top 50 Index components (about 200 stocks)

Additionally, derivatives like options and futures inherently support same-day trading. For US stocks, it depends on account balance; with over US$25,000, unlimited day trading is permitted.

Q3: When is it suitable to perform day trading?

Day trading is generally suitable during periods of high market volatility, such as:

• Opening hours (9:00-10:00)
• Closing hours (13:30-14:30)
• After major news releases

Conclusion: Is Same-Day Trading Suitable for You?

Day trading is suitable for short-term investors who aim to profit quickly from market fluctuations or prefer to settle all positions within the same day to avoid overnight risks.

Actual costs of day trading: Not only include fees and taxes but also psychological costs (time, energy, emotional swings). While transaction costs are relatively low, they are still higher than buy-and-hold strategies.

Risk assessment points:

1. Poor judgment or weak risk control can lead to huge losses
2. Insufficient funds for settlement may result in default penalties
3. Excessive leverage amplifies risks

Before deciding, ask yourself: Do you have enough capital, sufficient market judgment skills, ample time to monitor the market, and sound risk management strategies? If all answers are yes, then day trading may be suitable for you. Otherwise, conservative holding or swing trading might be wiser choices.