Understanding Day Trading: A Complete Guide to Short-Term Trading in Taiwan Stocks and U.S. Stocks

What is the dream of short-term traders? It’s not about holding long-term and waiting for appreciation, but about capturing market fluctuations within a single day to profit from price differences. This is called “day trading” — a trading method where buying and selling are completed within the same trading day.

As market volatility intensifies, day trading has become a choice for many investors. In the Taiwan stock market, day trading volume accounts for nearly 40%, and in the US stock market, due to the T+0 settlement system, investors can flexibly complete buy and sell transactions on the same day. But the key question is: Can you day trade in the US stock market? What are the differences between day trading in Taiwan and the US? How can you safely conduct day trading?

1. The essence of day trading

Day trading may seem simple, but it is actually a skill. The so-called “day trading” means closing all positions before the market closes — whether it’s buying first and then selling (buy-to-sell day trading), or borrowing securities to buy back (sell-to-buy day trading), both must be completed within the same day.

In Taiwan, since the Financial Supervisory Commission opened up stock day trading in 2016, this trading method has rapidly become popular. In contrast, the US stock market’s system inherently supports T+0 settlement, making day trading a normal practice with greater flexibility in capital use.

2. Who is suitable for day trading?

Not all investors are suitable for day trading. Before stepping into this field, ask yourself these five questions:

1. Do you have enough time?
Day trading requires full attention to the market. Missing entry or exit points by even a second can affect profits and losses. If you can’t focus on the market during working hours, the risk increases significantly.

2. Do you have disciplined execution?
The biggest enemies of day trading are hesitation and luck. Set stop-loss and take-profit points and stick to them. Don’t delay just because you think “there’s still a chance.”

3. Do you have strong psychological resilience?
In environments where every second counts, panic and greed are killers. Emotional decision-making can lead to fatal mistakes.

4. Do you have technical analysis skills?
Day trading is not about luck; it requires interpreting tools like intraday charts, volume-price relationships, support and resistance levels. Beginners attempting blindly will only lose their capital.

5. Do you have sufficient capital?
Day trading is a speculative approach that involves small bets for big gains. With too little capital and high leverage, the margin for error is tiny. One mistake can lead to liquidation.

3. Is day trading really that attractive?

Day trading has its advantages but also hides significant risks. Both should be objectively weighed.

Advantages:

Avoid overnight risk — Completing buy and sell transactions during the trading day means no holding positions overnight, so you don’t have to worry about unexpected international market events (like geopolitical incidents or major economic data releases) causing gaps at the open.

Increase capital turnover — Multiple trades within the same day can amplify profit potential, increasing returns per unit of capital.

Leverage amplification — Day trading profits are based on price differences, allowing control of larger positions with small capital. Of course, leverage is a double-edged sword; it magnifies gains but also losses.

Hidden costs:

Trading costs are not negligible — Although the government offers a 50% reduction in day trading tax (from 0.3% to 0.15%), frequent trading accumulates significant commissions and taxes. For example, in Taiwan, if you make 5 trades of NT$100,000 each in a day, earning only 0.5% (NT$500) per trade, net profit after costs might be only NT$100–200; a single loss can wipe out previous gains.

Psychological pressure of high-frequency decisions — The Taiwan stock market often experiences rapid 1–2% fluctuations during trading hours due to foreign investor movements, industry news, and market sentiment. For day traders, these fluctuations can determine wins or losses within minutes. Prolonged high tension can lead to misjudgments or missed opportunities.

Leverage risk multiplier — Many day traders use margin (long positions) or securities lending (short positions) to increase utilization. But when the market reverses, losses are amplified. For example, with initial margin at about 50% (2x leverage), buying NT$200,000 worth of stock with NT$100,000 margin, a 5% drop in stock price results in a NT$10,000 loss (10% of principal). In extreme cases, inability to close positions may lead to margin calls from brokers.

Addictive trap — Instant profit feedback can lead to addiction to short-term gains, gradually neglecting long-term performance. Many investors start with “trying” and end up “addicted,” ultimately wasting time, energy, and capital through small or large consecutive losses.

4. Can you day trade in the US stock market? How does it differ from Taiwan?

Answer: Yes, US stocks can be fully day traded, and in some aspects, they are more flexible than Taiwan stocks.

But the rules and cost structures differ greatly:

Capital requirements

• US: If your account balance is below $25,000, you can only make up to 3 day trades within 5 trading days; once you reach $25,000, there is no limit.
• Taiwan: No limit on buy-then-sell trades; for sell-then-buy, you need a margin account.

Trading hours

• US: Monday to Friday, 09:30–16:00 Eastern Time (which is 21:30–04:00 Taiwan time), with pre-market and after-hours trading available.
• Taiwan: Monday to Friday, 09:00–13:30, with after-hours trading for odd lots.

Settlement system

• US: T+1 settlement, allowing faster closing and settlement within the same day.
• Taiwan: T+2 settlement, exposing positions longer to market risk.

Price fluctuation limits

• US: No limits.
• Taiwan: ±10%.

Trading units

• US: 1 share as the basic unit, offering high flexibility.
• Taiwan: 1 lot (1,000 shares) as the standard unit, with higher participation barriers; after-hours trading allows odd lots.

Cost structure

• US: No securities transaction tax, only broker commissions (many are commission-free) and SEC/FINRA fees, resulting in much lower costs.
• Taiwan: 0.15% day trading tax plus broker fees, with higher overall costs.

Actual cost comparison
Suppose you buy 1,000 shares of NVDA at $1,000 each: total $1,000,000.

• Broker fee: nearly zero (many brokers offer free commissions).
• SEC/FINRA fees: less than $1.
• Total cost: negligible.

In Taiwan, the same scale of transaction incurs NT$900,000 in transaction tax alone, plus higher fees. This is why more investors are turning to US stocks for day trading.

5. Complete steps for day trading

While seemingly simple, making money from day trading requires a systematic approach. Here are three key steps:

Step 1: Choose trading targets

Not all stocks are suitable for day trading. From thousands of stocks, focus on those with “popularity” — high liquidity, high volatility, and high trading volume.

Observe news — Companies covered by media tend to attract investor attention. Whether positive or negative, news can amplify intraday volatility and create opportunities.

Pay attention to institutional research reports — When investment advisory firms or institutional analysts release reports, they often signal short-term trends. Large investors’ actions can be predictive.

Quantitative data analysis — Monitor rankings of strong stocks, weak stocks, turnover rates, and trading volume. Pay special attention to stocks with “sudden volume surges” — over 50% higher than the 5- or 10-day average.

Step 2: Determine trading direction

Day trading can be long (buy then sell) or short (sell then buy back). The decision on direction is critical.

Considerations for going long

• Watch overall market momentum; if the market is weak, individual stocks are likely to be dragged down.
• If a stock is significantly stronger than the market, consider holding longer.
• Use 5-minute charts (not daily charts) and previous high points as exit targets.

Considerations for shorting

• Requires a bearish market sentiment.
• Choose stocks affected by negative news or industry downturns.
• Use 5-minute charts; when the market hits new lows but the stock’s low is above previous lows, it signals a potential buy-back point.

Step 3: Execute trading discipline

This is the most overlooked but crucial step.

Strict stop-loss and take-profit — Most people can’t buy at the lowest and sell at the highest, so set clear stop-loss and take-profit points. Usually, 5% profit target and 2–3% stop-loss are recommended. Never wait until near market close to execute; doing so can lead to unfilled orders, margin calls, or panic selling at the end, resulting in losses below cost.

Capital management — Although day trading involves same-day buy and sell, positions may need to be held overnight. Keep sufficient funds reserved; only trade with what you can afford.

Mindset adjustment — The most important mindset for day trading is “decisiveness” and “not greed.” Be decisive when entering and exiting. Whether profit or loss, learn to cut losses promptly. This minimizes damage and preserves capital.

6. Calculation of day trading costs

Day trading costs mainly consist of broker commissions and transaction taxes. Understanding the cost structure is vital for profit calculation.

Example of Taiwan day trading costs
Suppose you buy 100 lots of TSMC (2330) at NT$600:

• Total transaction = NT$600 × 100,000 shares = NT$60,000,000
• Broker fee (assuming 0.04275%) ≈ NT$60 million × 0.04275% ≈ NT$25,650
• Day trading tax (half rate) ≈ NT$60 million × 0.15% = NT$90,000
• Total costs about NT$115,650

This means you need at least a 1.93% increase in stock price to break even after costs.

Example in US stocks
Suppose you buy 1,000 shares of NVDA at $1,000:

• Total = $1,000,000
• Broker fee: nearly zero (many brokers are commission-free)
• SEC/FINRA fees ≈ $0.000145 × 1,000 = $0.145
• Total costs: less than $1

This illustrates why many day traders prefer US stocks for their lower costs.

7. Recommended day trading targets for 2025

Choosing the right stocks can significantly improve success rates. Here are some high-volume, highly liquid stocks suitable for day trading:

Taiwan stocks
TSMC (2330), daily average volume NT$30,198K; Kangtai (6919) NT$20,292K; Chuan Lake (2059) NT$9,801K; Opto Tech (5371) NT$19,721K; Creative (3443) NT$31,882K; Zhen Ding (4958) NT$16,326K; TECO (1504) NT$19,053K; Kinsus (2328) NT$27,726K; Solomon (2359) NT$5,398K; Hon Hai (2317) NT$49,552K.

US stocks
Amazon (AMZN) 41,339K shares; Tesla (TSLA) 98,241K; Microsoft (MSFT) 19,889K; Meta (META) 11,943K; NVIDIA (NVDA) 175,023K; AMD (AMD) 56,632K; Alphabet Class C (GOOG) 24,419K; Exxon Mobil (XOM) 20,510K; Intel (INTC) 103,745K; Gilead Sciences (GILD) 75,258K.

8. Practical tips for day trading

Day trading is challenging, so it’s recommended to start with small capital to test the waters. After familiarizing yourself with market rhythm, gradually increase your positions. Key points include:

Choose the right time — The best times for day trading stocks are when the market is most active and volatile, typically at market open, close, and around major news releases or economic indicators.

Don’t chase the market — The core of day trading is “enter quickly and exit quickly.” Once your profit target is reached or the trend reverses, exit decisively. Greed can lead to profit erosion or losses.

Risk management is vital — Always set clear stop-loss points. If triggered, accept the loss and exit. This is the last line of defense for your capital.

Learn to judge market momentum — Stock movements are heavily influenced by the overall market. When the market is weak, be cautious; even strong stocks should have reduced positions. When the market is strong, you can increase participation.

9. Summary

Day trading is a high-risk, high-reward trading method. Its advantages include avoiding overnight risk, increasing capital turnover, and leveraging potential. Risks stem from high transaction costs, decision pressure, leverage dangers, and addiction traps.

Regarding “Can you day trade in the US stock market?” the answer is clear: Yes, US stocks can be fully day traded, and the system is more favorable. T+0 settlement, no price fluctuation limits, trading in single shares, and ultra-low costs make US day trading more flexible and cost-effective compared to Taiwan.

However, regardless of choosing Taiwan or US stocks, day trading is not a guaranteed way to make money. Successful day traders need ample time, strict discipline, calm mindset, and solid technical analysis skills. If you possess these, day trading can be a tool to amplify gains; if you’re still exploring, start with small capital to accumulate experience and gradually build your trading system instead of blindly chasing trends.