What is Day Trading? Why are Investors Obsessed with This Strategy?
Day trading (day trading) refers to T+0 trading, simply put, buying and selling on the same day, completing all transactions within the trading day. Unlike traditional T+2 rules, day trading allows you to quickly enter and exit the market amidst volatility without waiting until the next day to close positions.
Since Taiwan’s stock market opened to day trading in 2014, the number of participants has increased year by year. Currently, nearly 40% of Taiwan stock market trading volume comes from day trading. The main reasons attracting investors are twofold: fast stop-loss and avoiding overnight risk. If you make a wrong judgment, you don’t have to wait until the next day to cut losses; you can close the position immediately to stop bleeding.
Buy First, Sell Later / Sell First, Buy Later: Two Approaches to Day Trading
The core logic of day trading essentially involves only two operational modes:
Scenario 1: Buy First, Sell Later (Long Position)
You believe the stock will rise, buy during the day, and sell later to profit from the price difference. For example, buying TSMC at 9:15 AM and selling at 2:30 PM, all within the same trading day.
Scenario 2: Sell First, Buy Later (Short Selling)
You expect the stock to fall, first borrow and sell the stock (short), then buy back to cover after the decline. This method requires a broker to provide margin or securities lending, but it can profit during market downturns as well.
Cash Day Trading vs Margin & Securities Lending Day Trading: Which One Should You Choose?
Cash Day Trading — The Easiest Entry Method
Definition: Using only your own funds to buy and sell within the same day, without borrowing money or stocks from the broker.
Account Opening Requirements:
Broker account open for at least 3 months
At least 10 trades in the past year
Sign the risk disclosure statement
Transaction Costs:
Stamp tax 0.15%
Commission 0.1425%
Suitable for: Investors with sufficient capital who want to reduce costs
Margin & Securities Lending Day Trading — Leverage for Higher Risk
Definition: Achieving same-day buy and sell by financing (borrowing money) or securities lending (borrowing stocks) from the broker, essentially using financial leverage. Selling first and buying more later refers to securities lending (short selling).
Account Opening Requirements:
Broker account open for at least 3 months
At least 10 trades in the past year
Trading amount over NT$250,000 in the past year
Need to open a credit account
Transaction Costs:
Stamp tax 0.3%
Commission 0.1425%
Loan interest rate approximately 0.08%
Risk Warning: Leverage is a double-edged sword; wrong direction amplifies losses. Many people, due to insufficient cash, forcibly engage in margin trading and securities lending, ultimately facing huge debts.
Comparing Other T+0 Trading Instruments: Futures, Options, CFDs
Besides stocks, there are other options for day trading. These financial products are inherently T+0, eliminating the need for complex broker financing or securities lending processes.
Futures
Futures are standardized contracts that specify trading a certain quantity of an underlying asset at a predetermined price within a specific timeframe.
Features: High leverage, two-way trading, settlement at expiration Account Opening Threshold: Requires tens of thousands of NT dollars in margin Costs: Transaction tax of 0.02% (2 per 10,000), various fees around NT$30
Options
Options give the buyer the right (not obligation) to buy or sell at a specified price within a certain period, making risk more controllable compared to futures.
Features: Only pay the premium, limited risk, high flexibility Account Opening Threshold: Only a few thousand NT dollars for the premium Costs: Transaction tax of 0.1% (1 per 1,000), various fees around NT$10-20
CFDs (Contracts for Difference)
CFDs are over-the-counter contracts with brokers, where you do not actually purchase the underlying asset but trade the price difference. They cover a wide range of assets (stocks, forex, gold, cryptocurrencies, etc.).
Features: Low entry barrier, flexible leverage, 24-hour trading Account Opening Threshold: From a few tens to hundreds of USD Costs: Spread costs (no fixed tax)
The Deadly Advantages and Hidden Traps of Day Trading
Why investors are attracted:
Settlement within the same day, avoiding overnight gap risks
Losses can be immediately cut, preventing long-term being trapped
Relatively no capital needed (buy first, sell later, close before settlement)
Quick profits from short-term volatility
Hidden Risks:
Leverage Trap: The appeal of margin and securities lending day trading comes from leverage, but leverage also magnifies losses. Wrong direction can lead to doubled losses.
Cost Drain: Frequent trading fees, taxes, and interest can eat up most of your profits. Those who can’t accurately calculate costs often suffer the worst losses.
Time Cost: Day trading is not “no capital.” It requires monitoring the market all day, especially during volatile periods, making it impossible for working professionals to participate.
Psychological Toll: Short-term decision-making is tight on time, prone to emotional errors. Stop-loss may be prematurely triggered due to leverage pressure.
Capital Risk: Investors lacking cash should avoid margin and securities lending day trading. Default can lead to asset seizure.
Four Steps to Day Trading
If you’ve assessed the risks and are willing to try:
Step 1: Choose Trading Tools
Decide whether to use cash day trading, margin & securities lending, futures, or other derivatives.
Step 2: Find Underlying Assets
Taiwan stocks suitable for day trading include Taiwan 50 Index, Mid-Cap 100 Index components, totaling about 200 stocks. Confirm whether your selected stocks are on the day trading list.
Step 3: Technical Analysis & Risk Assessment
Complete price analysis before the market opens, judge short-term trends, and calculate maximum potential loss.
Step 4: Place Orders & Set Stop-Loss
Execute buy or sell orders, be sure to set stop-loss prices at the same time. Avoid gambling mentality; once you determine your loss limit, execute the stop-loss.
Can Fractional Shares Be Day Traded? When Is It Suitable?
Fractional Shares Restrictions: Not allowed. Fractional shares do not support margin trading, so they can only be sold the next day at the earliest.
Day trading is not for everyone. If you are among the following groups, think twice:
Insufficient funds wanting leverage
Working professionals unable to monitor the market all day
Conservative investors with low risk tolerance
Lacking clear trading discipline
But if you have ample capital, sharp judgment, and strict risk management, day trading indeed offers a way to profit quickly from short-term market fluctuations. Whether buying first or selling first, the key lies in cost control, discipline in stop-loss, and risk awareness.
Since day trading settles on the same day, it reduces systemic risk compared to overnight holdings. However, frequent trading costs are often underestimated by investors, which is why many day traders end up losing more than they gain.
Before entering the day trading market, ask yourself: Can I withstand consecutive losses? Do I have the discipline to stop-loss? Am I confident in my short-term market judgment? Only if all three answers are “yes,” is day trading worth trying.
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Must-read for trading: A complete analysis of selling first and buying later in Taiwan stocks and T+0 operations
What is Day Trading? Why are Investors Obsessed with This Strategy?
Day trading (day trading) refers to T+0 trading, simply put, buying and selling on the same day, completing all transactions within the trading day. Unlike traditional T+2 rules, day trading allows you to quickly enter and exit the market amidst volatility without waiting until the next day to close positions.
Since Taiwan’s stock market opened to day trading in 2014, the number of participants has increased year by year. Currently, nearly 40% of Taiwan stock market trading volume comes from day trading. The main reasons attracting investors are twofold: fast stop-loss and avoiding overnight risk. If you make a wrong judgment, you don’t have to wait until the next day to cut losses; you can close the position immediately to stop bleeding.
Buy First, Sell Later / Sell First, Buy Later: Two Approaches to Day Trading
The core logic of day trading essentially involves only two operational modes:
Scenario 1: Buy First, Sell Later (Long Position)
You believe the stock will rise, buy during the day, and sell later to profit from the price difference. For example, buying TSMC at 9:15 AM and selling at 2:30 PM, all within the same trading day.
Scenario 2: Sell First, Buy Later (Short Selling)
You expect the stock to fall, first borrow and sell the stock (short), then buy back to cover after the decline. This method requires a broker to provide margin or securities lending, but it can profit during market downturns as well.
Cash Day Trading vs Margin & Securities Lending Day Trading: Which One Should You Choose?
Cash Day Trading — The Easiest Entry Method
Definition: Using only your own funds to buy and sell within the same day, without borrowing money or stocks from the broker.
Account Opening Requirements:
Transaction Costs:
Suitable for: Investors with sufficient capital who want to reduce costs
Margin & Securities Lending Day Trading — Leverage for Higher Risk
Definition: Achieving same-day buy and sell by financing (borrowing money) or securities lending (borrowing stocks) from the broker, essentially using financial leverage. Selling first and buying more later refers to securities lending (short selling).
Account Opening Requirements:
Transaction Costs:
Risk Warning: Leverage is a double-edged sword; wrong direction amplifies losses. Many people, due to insufficient cash, forcibly engage in margin trading and securities lending, ultimately facing huge debts.
Comparing Other T+0 Trading Instruments: Futures, Options, CFDs
Besides stocks, there are other options for day trading. These financial products are inherently T+0, eliminating the need for complex broker financing or securities lending processes.
Futures
Futures are standardized contracts that specify trading a certain quantity of an underlying asset at a predetermined price within a specific timeframe.
Features: High leverage, two-way trading, settlement at expiration
Account Opening Threshold: Requires tens of thousands of NT dollars in margin
Costs: Transaction tax of 0.02% (2 per 10,000), various fees around NT$30
Options
Options give the buyer the right (not obligation) to buy or sell at a specified price within a certain period, making risk more controllable compared to futures.
Features: Only pay the premium, limited risk, high flexibility
Account Opening Threshold: Only a few thousand NT dollars for the premium
Costs: Transaction tax of 0.1% (1 per 1,000), various fees around NT$10-20
CFDs (Contracts for Difference)
CFDs are over-the-counter contracts with brokers, where you do not actually purchase the underlying asset but trade the price difference. They cover a wide range of assets (stocks, forex, gold, cryptocurrencies, etc.).
Features: Low entry barrier, flexible leverage, 24-hour trading
Account Opening Threshold: From a few tens to hundreds of USD
Costs: Spread costs (no fixed tax)
The Deadly Advantages and Hidden Traps of Day Trading
Why investors are attracted:
Hidden Risks:
Four Steps to Day Trading
If you’ve assessed the risks and are willing to try:
Step 1: Choose Trading Tools
Decide whether to use cash day trading, margin & securities lending, futures, or other derivatives.
Step 2: Find Underlying Assets
Taiwan stocks suitable for day trading include Taiwan 50 Index, Mid-Cap 100 Index components, totaling about 200 stocks. Confirm whether your selected stocks are on the day trading list.
Step 3: Technical Analysis & Risk Assessment
Complete price analysis before the market opens, judge short-term trends, and calculate maximum potential loss.
Step 4: Place Orders & Set Stop-Loss
Execute buy or sell orders, be sure to set stop-loss prices at the same time. Avoid gambling mentality; once you determine your loss limit, execute the stop-loss.
Can Fractional Shares Be Day Traded? When Is It Suitable?
Fractional Shares Restrictions: Not allowed. Fractional shares do not support margin trading, so they can only be sold the next day at the earliest.
Best Trading Times:
Who Is Suitable for Day Trading? Long or Short?
Day trading is not for everyone. If you are among the following groups, think twice:
But if you have ample capital, sharp judgment, and strict risk management, day trading indeed offers a way to profit quickly from short-term market fluctuations. Whether buying first or selling first, the key lies in cost control, discipline in stop-loss, and risk awareness.
Since day trading settles on the same day, it reduces systemic risk compared to overnight holdings. However, frequent trading costs are often underestimated by investors, which is why many day traders end up losing more than they gain.
Before entering the day trading market, ask yourself: Can I withstand consecutive losses? Do I have the discipline to stop-loss? Am I confident in my short-term market judgment? Only if all three answers are “yes,” is day trading worth trying.