T+0 Same-Day Clearing Complete Guide | Full Analysis of Taiwan Stock Day Trading Methods and Costs

What Exactly Is Day Trading in Taiwan Stocks? The Difference Between Selling First and Buying Later vs. Buying First and Selling Later

In Taiwan’s stock market, “day trading” (當沖) refers to completing buy and sell transactions within the same trading day, commonly known as T+0 trading. Although the Taiwan stock system operates on a T+2 settlement cycle, investors can utilize margin trading and securities lending mechanisms provided by brokers to achieve either buy-then-sell or sell-then-buy within the same day, thereby avoiding overnight risk.

The core logic of day trading is simple: you buy a stock at 9:15 AM and sell it at 2:30 PM, earning the price difference in between. This approach is especially attractive to traders who do not want to bear the risk of overnight black swan events. According to market data, since Taiwan opened up to cash day trading in 2014, day trading volume has accounted for nearly 40% of total market turnover, with user numbers growing annually.

It’s important to note that many investors confuse the “sell first, buy later” restriction. Here, “sell first, buy later” refers to securities lending operations—borrowing stocks from brokers to sell short, then buying back at a lower price to profit from the decline. However, this operation is not entirely unrestricted and is also subject to day trading qualification requirements.

Two Paths of Day Trading in Taiwan Stocks: Cash vs. Margin & Securities Lending

Cash Day Trading — Using Your Own Funds

Cash day trading is the most straightforward method, relying entirely on personal funds for same-day buy and sell transactions. If you are bullish on a stock, you buy it at market open and sell it during the day when you find a profit point. Conversely, you can also sell first and buy later (short selling).

Account Opening Requirements:

• Opened for at least 3 months
• At least 10 buy/sell transactions in the past year
• Signed risk disclosure and same-day cancellation agreement

Cost Structure:

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

Margin & Securities Lending Day Trading — Borrowing Money or Stocks to Amplify Operations

Margin day trading involves borrowing funds or stocks from brokers to leverage larger trading volumes with a smaller capital outlay. Margin trading is for going long, while securities lending (short selling) is for going short. Many are attracted to this method because it allows participation in larger trades with limited capital, but it also entails higher leverage risks.

Account Opening Requirements:

• Opened for at least 3 months
• At least 10 buy/sell transactions in the past year
• Trading volume exceeding NT$250,000 in the past year
• Must establish a credit account

Cost Structure:

• Securities transaction tax: 0.3%
• Commission (buy + sell): 0.1425%
• Loan interest rate (average): 0.08%

Stock Day Trading Is Not the Only Option — Comparing Other Natural T+0 Financial Instruments

Besides stocks that rely on margin and securities lending for day trading, there are various financial instruments inherently capable of T+0 trading. Each has its own advantages and disadvantages.

Futures Market — Paradise for 96% of Speculators

Futures trading is inherently T+0; both parties sign a contract agreeing to deliver or settle at a future date at a specified price. Its main features are high leverage and two-way trading, but this also means losses can quickly escalate.

Costs:

• Transaction tax: 0.02%
• Commission: about NT$30 (varies by underlying)

Entry Barrier: Usually requires tens of thousands of NT dollars in margin

Options Trading — More Friendly Leverage in Derivatives

Options give the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a certain period. Compared to futures, options only require paying a premium (a few thousand NT dollars), making entry much easier, but they also carry high leverage risks.

Costs:

• Transaction tax: 0.1%
• Commission: around NT$10+ per trade

CFD (Contract for Difference) — One-Stop Global Asset Trading

CFDs allow trading without owning the underlying asset, through contracts with brokers. The range of tradable assets is extensive—stocks, forex, gold, cryptocurrencies, etc.—with very low account opening thresholds (tens to hundreds of USD). Since CFDs are OTC products with no expiry date, risk management must be very cautious.

Costs:

• Mainly the spread (buy-sell difference)

The Double-Edged Sword of Day Trading: Why It Attracts and Why It’s Dangerous

The Real Advantages of Day Trading

Investors value day trading primarily because it allows closing out and exiting within the same day, enabling quick stop-loss without waiting for the next trading day. During market volatility or sudden news events, this ability to exit immediately can protect assets.

Second, in a certain sense, day trading can be considered a “no-capital” business. Traditional stock purchases require T+2 settlement, but day trading involves immediate buy and sell clearing, reducing capital pressure. This allows investors to cycle their capital more efficiently.

Third, it completely avoids overnight holding risks. Many stocks are affected by foreign institutional investors and international news after hours, causing gaps at the next open, which can significantly reduce assets overnight. Day trading offers a chance to avoid these black swan events within the same trading day.

Hidden Traps and Cost Pitfalls

However, day trading is also fraught with pitfalls. First is the psychological leverage temptation. Many beginners are attracted by the flexibility of day trading and inadvertently use leverage beyond their capacity. When judgment is wrong, psychological pressure can lead to delayed stop-loss or premature profit-taking, often resulting in significant losses and minimal gains.

Second is hidden costs eating into profits. The seemingly small costs—0.15% transaction tax plus 0.1425% commission—can accumulate quickly with multiple trades in a day. Short-term trading profits are already limited; high costs can wipe out gains.

Third is mental and time consumption. Day trading requires constant monitoring of the market, including individual stock movements, overall market trends, industry news, chip flows, and news headlines. This can be a huge psychological and time burden, especially for working professionals or inexperienced investors.

Finally, there is cash flow risk. If judgment is wrong and positions are not closed within the day, it can lead to overnight risk, or even default due to insufficient funds, resulting in serious financial consequences.

Which Stocks and When Are Suitable for Day Trading

In Taiwan, the scope of stocks eligible for day trading is limited to about 200 stocks, mainly including components of the Taiwan 50 Index, the Mid-Cap 100 Index, and the OTC’s Fubon 50 Index.

Odd-lot stocks cannot be day traded; they can only be sold the next day.

Timing-wise, day trading is usually conducted during high-volatility periods—such as within the first 30 minutes after market open, the last hour before close, or during major news events. These periods tend to have higher trading volume and more price swings, providing more opportunities.

Common Questions and Answers

Q: Can odd-lot stocks be traded on the same day?
No. The odd-lot market does not support credit trading; they can only be sold the next day, whether during or after trading hours.

Q: Are there restrictions on US stock day trading?
Yes. The Pattern Day Trader rule applies. Regular accounts cannot make more than 3 day trades within 5 business days; if the account balance exceeds US$25,000, there are no restrictions; below that, trading is frozen for 90 days.

Q: Who is most suitable for day trading?
Suitable for short-term traders who are敏銳於市場波動且能承受高風險。風險厭惡、時間有限或缺乏經驗的投資者應謹慎參與。

Summary: Day Trading Is Not a Silver Bullet, It’s a Double-Edged Sword

“Buy today, sell today” may sound simple, but it demands high levels of knowledge,心理素質、時間投入。它確實提供了避開隔夜風險、快速獲利的機會，但也放大了交易成本、心理壓力與槓桿風險。

投資前，必須誠實問自己三個問題：一、我的資金是否足夠應付交易成本？二、我的心理素質能否承受每日頻繁的價格波動？三、我是否有足夠的時間與市場知識？若三個答案都是“是”，當沖才是你的選擇；否則，波段操作或長期持股可能更適合你的投資風格。