Recently, many people have been asking whether stocks can be bought and sold on the same day. In fact, Taiwan’s listed stock market already opened same-day trading for spot shares back in 2014. Today, trading volume already accounts for nearly four-tenths of Taiwan’s overall stock market, and the number of participants has been increasing year by year. Put simply, day trading is using margin financing and securities lending to complete buy-and-sell transactions within the same day, thereby enabling T+0 trading.

Why do people day trade? It’s simple. Some investors don’t want to hold stocks overnight and are afraid that a “black swan” event could happen overnight. Others want to cut losses quickly and don’t want to wait until the next day to sell stocks. If you make the wrong call or see the market moving in the opposite direction, day trading allows you to exit immediately. But this also means you need to watch the market all day—throughout trading hours, you must pay attention to individual stock movements, broader market trends, and changes in order flow. The work involved is far more than in swing trading.

When it comes to how to sell stocks, day trading actually has two methods. The first is spot day trading, where you buy with your own funds and then sell. The second is margin and securities-lending day trading, where you borrow money or borrow shares from a broker. The account-opening threshold for spot day trading is relatively lower: you only need to have held the account for at least 3 months, have made 10 or more trades within the past year, and have signed a risk disclosure statement. Margin and securities-lending day trading adds one more requirement: your total trading amount must be 250,000 or more within the past year, and you also need to open a credit account.

Be especially careful with fees. The cost of spot day trading is 0.15% securities transaction tax plus a 0.1425% transaction/handling fee—so the total cost for a single buy-and-sell is about 0.29%. But if you trade 5 times in a day, the costs add up to 1.45%, which means the stock has to rise by a substantial amount for you to break even and make a profit. The cost of margin and securities-lending day trading is even higher: 0.3% securities transaction tax, 0.1425% transaction/handling fee, plus borrowing interest averaging 0.08%—so overall costs will consume a large portion of your gains.

Some people say day trading is a “no-capital” business, but that’s actually a misconception. While you don’t need to wait for T+2 settlement after positions are cleared, if you don’t have enough capital or credit limits, frequent day trading can easily get you into trouble. Especially those using leverage: if you get the direction wrong, stop-losses may not be triggered in time; if you get the direction right, you often take profits too early due to leverage pressure. In the end, you frequently end up losing huge amounts while only making small profits. I’ve seen many people drawn into day trading only to face massive debt because they had insufficient funds or weak risk-bearing ability.

Besides stocks, derivatives such as futures, options, and Contracts for Difference (CFD) are themselves T+0 products, so you can buy and sell on the same day. For futures trading, the transaction tax is 2/100,000, and the transaction/handling fee is about 30 yuan, but you need a margin deposit of tens of thousands. Options have a lower threshold: you can trade with just a few thousand in option premium, and the transaction tax is 1/1,000. CFDs are the most flexible: basically there’s no account-opening threshold—you can open an account with anywhere from several dozen US dollars to several hundred US dollars, and you can trade various underlying assets such as foreign exchange, gold, and virtual currencies, but they also carry the highest leverage risk.

Currently, Taiwanese stocks that can be used for day trading include component stocks of the Taiwan 50 Index, component stocks of the Mid-Cap 100 Index, and component stocks of the FTSE Taiwan Top 50 Index—about 200 stocks in total. However, odd-lot trading is not available for day trading; the earliest you can sell is the next day. Some stocks that are classified as “disposal stocks” or “attention stocks” with a day-trading ratio that is too high may also have restrictions or may even be prohibited from day trading.

The best time for day trading is usually the opening and closing sessions, because market volatility is higher then and there are more trading opportunities. If major news events occur, volatility can become even greater. But remember: short-term trading requires investors to have sharp judgment and a high level of vigilance, because market fluctuations are intense and the risk is relatively higher.

In the end, day trading is suitable for short-term investors who want to make profits quickly, are willing to watch the market all day, and have strong risk-bearing ability. But if your judgment is average or your capital is limited, day trading may not be the best choice. Setting stop-loss prices properly and controlling risk are the most important lessons in day trading.