Recently, I’ve noticed that many people around me want to learn about day trading—especially how to buy and sell stocks within the same day. In fact, since Taiwan’s stock market opened cash day trading in 2014, this trading style has become more and more common. Nowadays, trading volume already accounts for nearly 40% of Taiwan stock market turnover.

Let’s first talk about the most core concept. Day trading is T+0 trading, meaning that if you buy a stock today, you can sell it on the same day, without having to wait until the next day. This may sound simple, but the logic behind it actually uses the margin trading and securities lending services provided by brokers, to complete same-day buying and selling within the T+2 trading system framework. For example, if you buy TSMC at 9:15 AM, you can sell it at 2:30 PM. The movement of funds in between is handled with the broker’s assistance.

So why do some people like doing this? Mainly because it allows for quick stop-losses, without having to bear the risk of holding positions overnight. If you make a wrong call or see a sudden piece of news, you don’t have to wait until the next day to close your position—you can decide immediately how to sell the stock. Another appeal is that, since you buy and sell to close the position, theoretically you don’t need a large amount of capital to participate.

But the risks are also obvious. Frequent trading accumulates substantial transaction fees and securities transaction tax. The cost of a single cash day trade is about 0.29%; trading 5 times in one day would reach 1.45%. This means the stock must have a significant price increase for the trade to truly be profitable. Moreover, many people end up overtrading due to the lure of leverage: if their direction is correct, they may take profits too early because of leverage pressure; if they are wrong, they may not cut losses in time. In the end, it often leads to huge losses and minimal gains.

There are two main ways to do day trading in Taiwan stocks. Cash day trading uses your own funds; you can apply if your account has been open for at least 3 months and you have made at least 10 trades in the past year. Securities lending day trading means borrowing money or stocks from a broker; the threshold is a bit higher. You need trading amount of at least 250,000 in the past year, and you also need to set up a credit account. The fees for the two methods differ: the securities transaction tax for cash day trading is 0.15%, while it is 0.3% for securities lending day trading.

One important point is that Taiwan stocks have no clear limit on the number of day trades. As long as there is sufficient capital during trading hours (from 9:00 AM to 1:30 PM), theoretically you can make unlimited trades. However, in practice, it will be affected by factors such as your available credit limit and the eligible day-trading underlying securities. Not all stocks can be day traded. Currently, only stocks that are components of the Taiwan 50 Index, the Mid-Cap 100 Index, and the Taiwan OTC 50 Index are eligible, for a total of about 200 stocks. Odd-lot trading is not allowed for day trading at all.

Besides stocks, other financial instruments can also be bought and sold on the same day. Futures are inherently T+0 trades, so they can naturally be traded within the day, but they require tens of thousands in margin. Options have a lower threshold; you only need a few thousand in option premium. There are also derivatives such as CFDs (Contracts for Difference). Since they do not involve ownership of the underlying asset, they have the lowest entry barrier—account opening can be done with anywhere from dozens to hundreds of dollars, making them especially suitable for short-term swing trading.

So how do you actually operate? The logic is simple. If you expect a stock to rise, you buy and sell it within the same day—this is called going long. If you expect it to fall, you sell first and then buy back—this is called going short. The key is to complete the entire process within the same trading day. Many people who are bullish on a certain stock’s upward trend will enter at the opening or around major news events, and then close the position to realize profits within a short period of time.

But there is a risk that’s easy to overlook here. If you don’t have enough cash but still want to do day trading, you can fall into the so-called “no-capital day trading” trap—essentially using excessive leverage. Once the trade fails or a default occurs, you may face enormous debt. This is why many people end up suffering devastating losses.

Finally, day trading requires putting in a lot of time to monitor the market. Unlike swing trading, which you can basically leave alone, day trading requires you to closely watch intraday stock price movements, overall market direction, order flow changes (the “chips”), and any important news updates. The homework involved is far more complex than with ordinary trading. If your judgment is not strong enough or your risk control awareness is weak, losses can easily happen. Therefore, before deciding whether to engage in day trading, you must first assess whether you have enough knowledge, time, and psychological tolerance.