A Complete Guide to Day Trading: How T+0 Buying and Selling Works, and Why Partial Share Day Trading Is Restricted

Market Phenomenon: Why Day Trading Has Become the Mainstream in Taiwan Stocks

Since Taiwan opened up same-day trading in 2014, this “buy and sell on the same day” trading model has permeated every corner of the market. According to statistics, nearly 40% of Taiwan stock daily trading volume comes from day traders, and the number of participants has been increasing year by year. Why does this wave continue to ferment?

Simply put, day trading allows investors to break free from the T+2 settlement system — you don’t have to wait for the next day’s settlement, nor do you have to endure overnight holding uncertainties. For traders aiming to capture intraday price fluctuations and quickly enter and exit, this opens a new door to profit.

The Essence of Day Trading: Breaking the T+2 Limitation

T+0 day trading (day trading)'s core logic is actually not mysterious. Taiwan’s stock market originally operated under a T+2 system, meaning you had to wait two trading days after buying to settle. But through broker-provided margin financing and securities lending services, investors can complete both buy and sell transactions within the same trading day, cleverly circumventing this restriction.

For example: Suppose you buy 100 lots of TSMC at 9:15 AM and sell all at 2:30 PM. On the surface, it looks like you executed a same-day buy and sell; but in reality, the broker performs complex back-end settlement operations — you purchase with your own funds or margin, then immediately sell, offsetting the buy and sell, without reducing your securities lending inventory. Meanwhile, the broker earns multiple fees and interest charges. For traders, this is【day trading】; for brokers, it’s a way to increase service revenue.

Spot Trading vs Margin Trading: Two Entry Paths

Spot Day Trading: Lower Barrier

Spot day trading relies on your own funds for transactions, making operations relatively straightforward.

Trading directions

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

Account opening requirements

• Open an account with a broker for at least 3 months (not necessarily the same broker)
• Complete more than 10 buy/sell transactions in the past year
• Sign the day trading risk disclosure and related agreements

Cost structure

• Stamp duty: 0.15%
• Commission (buy and sell): 0.1425%

Margin Day Trading: A Double-Edged Sword Amplified by Leverage

Margin day trading allows investors to borrow money or stocks from brokers, thereby magnifying trading scale. Here, “margin financing” means borrowing money, “securities lending” means borrowing stocks.

Trading directions

• Bullish: Margin buy + securities lend sell
• Bearish: Securities lend sell + margin buy

Account opening requirements

• Open a margin account with a broker for at least 3 months
• Complete more than 10 transactions in the past year
• Total transaction amount over the past year exceeds NT$250,000
• Must open a credit account

Cost structure

• Stamp duty: 0.3% (higher than spot)
• Commission (buy and sell): 0.1425%
• Average interest rate on margin: 0.08%

Diversification of Day Trading Methods: Beyond Stocks

Besides stocks, other financial instruments inherently support T+0 trading, often with simpler cost structures.

Futures Market: The Classic Arena for Leverage Trading

Futures are two-way trading instruments supporting both long and short positions. 96% of participants are speculators. Futures trading itself is a T+0 mechanism, settled on the same day.

Entry requirements

• Sufficient margin deposit (usually tens of thousands of NT dollars)
• Quoted in units (contracts)

Cost burden

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

Options Trading: Small Capital, Big Returns

Options derive from futures concepts, granting holders the right (not obligation) to buy or sell at a specified price within a certain period. Options also naturally support T+0 trading.

Entry requirements

• Quoted in units, only need to pay the premium (several thousand NT dollars)
• Lower threshold than futures

Cost burden

• Transaction tax: 0.1%
• Various commissions: about NT$10+ per trade

Contracts for Difference (CFD): The Most Flexible Derivative

CFD is a derivative contract between investors and brokers, where investors pay margin but do not own the actual underlying asset. CFD is essentially T+0 trading, with no expiration date, covering a wide range of assets (forex, precious metals, stock indices, individual stocks, cryptocurrencies, etc.).

Entry requirements

• Very convenient online account opening
• Very low initial capital (tens to hundreds of USD)

Cost structure

• Mainly spread (the difference between bid and ask prices)

Comparison of Five Major Tools: Fees, Qualifications, Risks at a Glance

The Double-Edged Sword of Day Trading: Opportunities and Traps

The Attraction

• Quick stop-loss exit: If you realize a mistake, no need to wait until the next day; you can close the position immediately to cut losses
• High capital efficiency: Offset buy and sell, no need for large funds to complete a trade
• Avoid overnight risk: No worries about overnight news causing gaps at open
• Rich liquidity: Especially in tech stocks, small caps, and high-volatility assets, large intraday price swings provide ample trading opportunities

Hidden Dangers

Leverage Traps
Many novice traders are attracted by the “zero-cost day trading” hype but do not truly understand the leverage mechanism behind it. Improper margin or securities lending operations can turn a single misjudgment into huge losses, even triggering forced liquidation and capital shortfalls.

Cost Erosion of Profits
Frequent short-term trading accumulates costs such as commissions, interest, and spreads. Many traders find that seemingly profitable trades turn into losses after deducting costs.

Time Cost of Market Monitoring
Day trading requires traders to monitor the market all day, paying attention to individual stocks, indices, chips, real-time news, and more variables. Compared to swing trading, the time and effort invested far exceed expectations, with returns often not matching the effort.

Direction Judgment Errors
Intraday volatility is intense; a wrong judgment can lead to delayed stop-loss (larger losses) or premature take-profit (missed gains), ultimately resulting in losses.

Practical Guide: Four Steps to Day Trading

Whether it’s spot day trading, margin day trading, or futures/options, the basic trading logic is consistent:

1. Assess Market Direction: Analyze technical, fundamental, and chips data
2. Choose Trading Tool: Decide on stocks, futures, options, or CFD, and the platform
3. Set Entry Point: Decide buy price (bullish) or sell price (bearish)
4. Set Risk Protections: Predefine stop-loss and take-profit levels, close within the day

For example, with CFD trading, investors can open an account on a trading platform, select a stock (e.g., Apple AAPL), analyze the price, decide to go long or short, and close within the day. Due to the flexible leverage and low threshold, small capital can control significant positions, making it suitable for short-term swing trading. However, the leverage also requires strict risk control — every trade should have a clear stop-loss level.

Common FAQs

Q: Can odd-lot stocks be day traded?
No. Odd-lot trading does not support margin financing or securities lending, and cannot be settled within the same day; the earliest is the next day. For investors wanting to day trade odd-lots, this is a systemic restriction.

Q: Which stocks qualify for day trading?
Currently, about 200 stocks in Taiwan qualify, including Taiwan 50 index components, Mid-Cap 100 index components, and OTC 50 index components. In the US, regular accounts can trade up to three times within five trading days; accounts with over US$25,000 in assets have no trading limit. Accounts below these thresholds are frozen for 90 days.

Q: When is the best time to day trade?
Market activity and volatility are key. Opening hours, closing hours, and major news releases often present larger fluctuations, providing more opportunities for day trading.

Conclusion

Same-day buy and sell methods attract short-term traders seeking quick profits and meet investors who dislike overnight risks. However, day trading is not a risk-free cash machine. It demands sharp market insight, strict risk discipline, sufficient capital reserves, and long hours of attention. Mistakes in judgment or poor risk management can lead to losses of principal, or even trigger default due to insufficient funds, resulting in additional losses.

Before engaging in day trading, investors should assess their knowledge, psychological resilience, and capital strength, rather than be deceived by promises of “profit without capital.” Day trading is a tool; its usefulness depends on the user’s skill boundaries.