Is it possible to buy and sell stocks today? The complete guide to T+0 day trading

What is Day Trading?

Day trading refers to completing buy and sell transactions within the same trading day, commonly known as “buy today, sell today” or “T+0 trading.” Many traders are tired of the restrictions imposed by the traditional T+2 trading system and hope to close their positions within the same day to avoid overnight risks and seize short-term opportunities.

The Taiwan stock market originally followed the T+2 system, but through margin trading and short selling services provided by brokers, investors can actually execute trades on the same day. For example, if you are bullish on TSMC (TSM) in the morning, you buy 1,000 shares at 9:15 am and sell them at 2:30 pm. Buying and selling the same amount of shares in one day equals a day trade. The emergence of this method has led to nearly 40% of Taiwan stock market trading volume since the market opened up to same-day stock trading in 2014.

Cash Day Trading vs Margin & Short Selling Day Trading: How to Choose?

Cash Day Trading

Cash day trading involves using your own funds to buy and sell within the same day, which is relatively simple and straightforward.

Operation Methods:

• Bullish: buy in the morning + sell in the same day
• Bearish: sell in the morning + buy back in the same day

Account Opening Requirements: Must have an account with a broker for at least 3 months, with more than 10 transactions in the past year, and sign an agreement for same-day closing and risk disclosure.

Cost Structure: Stamp tax 0.15%, transaction fee 0.1425%, overall costs are lower.

Margin & Short Selling Day Trading

Margin & short selling day trading involves borrowing money or stocks from the broker to execute trades. Borrowing money is called margin trading, borrowing stocks is called short selling.

Operation Methods:

• Bullish: margin buy + short sell
• Bearish: short sell + margin buy

Account Opening Requirements: Must have an account open for over 3 months, with more than 10 transactions in the past year, trading amount over NT$250,000, and establish a credit account.

Cost Structure: Stamp tax 0.3%, transaction fee 0.1425%, average interest rate on borrowed funds 0.08%. Overall costs are significantly higher than cash day trading.

The Real Advantages of Same-Day Stock Trading

Close on the same day, quick stop-loss Compared to T+2, which requires waiting until the next day to exit, day trading allows investors to close positions immediately. If the judgment is wrong, they can stop loss right away, avoiding additional overnight losses.

Attractiveness of no-capital day trading Since buy and sell are settled within the same day, funds are transferred quickly, and investors can participate without actually holding stocks. This provides more opportunities for traders with limited capital.

Avoid overnight holding risks Stock markets can fluctuate significantly overnight due to news or events. Day trading completely avoids this risk, making it suitable for investors unwilling to bear overnight risks.

Risks and Pitfalls of Day Trading

Leverage risks are severely underestimated Many investors are attracted by “no-capital day trading” but overlook the financial leverage risks involved. Leverage amplifies both gains and losses. Those with insufficient funds are often the most vulnerable; mistakes can lead to huge debts.

Over-leverage leads to poor decision-making When investors use leverage exceeding their actual capital, they tend to become overconfident. When the market moves against them, they may fail to stop loss in time; when correct, they may prematurely take profits due to leverage pressure. This often results in large losses and minimal gains.

Transaction costs erode profits Short-term trading profits are limited, and high transaction fees, stamp taxes, and interest on margin loans can eat up most of the gains. Sometimes, seemingly profitable trades are actually profits taken by intermediaries.

High time cost for monitoring Day trading requires monitoring the market throughout the day, paying attention to individual stocks, indices, related sectors, minute-by-minute price movements, and tracking capital flows and breaking news. Compared to swing trading, the workload is much higher.

Be aware of restrictions on cash day trading Regulators may impose bans on same-day closing in certain situations, which can disrupt trading plans.

Other Financial Instruments Suitable for Same-Day Trading

The higher costs of stock day trading in Taiwan are due to broker fees. In contrast, some financial products inherently support T+0 trading with simpler cost structures.

Futures Trading

Futures are inherently T+0, with buyers and sellers entering into contracts for future delivery. The key features are leverage and two-way trading, with about 96% of participants being speculators.

Account Opening Requirements: Require sufficient margin deposits, usually tens of thousands of NT dollars to start trading.

Cost Structure: Transaction tax of 0.02%, total fees around NT$30 (varies by underlying asset).

Options Trading

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.

Account Opening Requirements: Pay a small premium (a few thousand NT dollars), much lower than futures.

Cost Structure: Transaction tax of 0.1%, total fees around NT$10-20, making it the lowest cost.

Contracts for Difference (CFD)

CFD is an over-the-counter derivative where investors sign an agreement with the broker, paying margin to trade assets like forex, gold, stock indices, individual stocks, oil, cryptocurrencies, etc. CFDs are theoretically unlimited in holding period and are naturally T+0.

Account Opening Requirements: Very low threshold, starting from tens to hundreds of dollars.

Cost Structure: Mainly spreads; no additional commissions.

Comparing Costs and Risks of Day Trading Tools

Different trading methods have their pros and cons. Cash stock day trading suits experienced traders; margin trading has higher costs but larger leverage. Futures, options, and CFDs inherently support T+0 but come with increased risks.

Account opening thresholds:

• Lowest: CFD
• Next: Options
• Higher: Futures (requiring more capital)
• Stock day trading: specific trading record requirements

Fees:

• Lowest: Cash stock day trading (stamp tax 0.15% + fee 0.1425%)
• Next: Margin stock day trading (stamp tax 0.3% + fee 0.1425% + interest)
• Futures: fixed around NT$30 per trade
• Options: only a few NT dollars
• CFD: spreads, no extra fees

Risks: All day trading involves leverage risk, especially for undercapitalized investors. Margin trading and CFDs carry higher leverage risks; futures and options, while naturally T+0, also face significant leverage-related losses.

Which Stocks Are Suitable for Day Trading?

In Taiwan, the stocks available for day trading include components of the Taiwan 50 Index, the Mid-Cap 100 Index, and the FTSE TWSE Taiwan 50 Index (about 200 stocks).

Odd lots cannot be day traded, as credit trading is not available during or after trading hours; they can only be sold the next day.

Tech stocks and small-cap stocks, due to their larger price swings, offer more trading opportunities and are popular among day traders. However, higher volatility also means higher risk, requiring sharper judgment.

When is the Best Time to Day Trade?

Since day trading is usually completed within a short period, the best times are during high market activity and volatility, such as the opening hours, before market close, or during major news events. These periods have sufficient liquidity for quick entry and exit.

FAQs

Q: Can odd lots be traded on the same day?
No. Odd lot trading does not support credit trading, and cannot be sold during or after trading hours; the earliest sale is the next day.

Q: Are there restrictions on US stock day trading?
Regular accounts in the US cannot execute more than three trades within five business days. If the account balance exceeds $25,000, there are no trading limits. If below, trading will be frozen for 90 days until funds are replenished.

Q: Is day trading suitable for me?
Day trading suits short-term traders who can tolerate high risks, have enough time to monitor the market, and are sensitive to market fluctuations. If you lack sufficient capital, risk management skills, or cannot watch the market all day, day trading may not be appropriate.

Summary

Stock day trading offers opportunities to avoid overnight risks and execute quick stop-losses but also involves high costs, high risks, and significant time commitment. For investors with ample capital, strong judgment, and risk tolerance, day trading can be a short-term profit tool. However, for most, rational assessment of personal ability and choosing suitable trading methods are more important than blindly following the trend.

Futures, options, and CFDs, which inherently support T+0, provide alternative paths but also require careful management of leverage risks. Regardless of the method chosen, risk control and setting stop-loss orders are always the top priorities in day trading.