Same-day Clearing Complete Guide: Can Stocks Be Bought and Sold Today? Full Analysis of T+0 Trading Method

What is T+0 Day Trading?

Day trading refers to T+0 trading, which means investors complete buying and selling within the same trading day without waiting for next-day settlement. The main feature of this trading method is that positions can be closed on the same day, avoiding overnight risk.

Many investors choose day trading because the traditional T+2 settlement system requires them to wait until the next day to sell, which can cause them to miss market opportunities. Day trading allows immediate exit when prices reach desired levels or to cut losses promptly when misjudging the market.

It is important to note that this trading approach requires investors to have sharp judgment and high alertness, as market volatility can be intense within short periods, and the risks are relatively higher. Besides stocks, futures, ETFs, commodities, and even cryptocurrencies can be traded via day trading.

Comparison of Two Major Stock Day Trading Methods

In Taiwan’s stock market, there are mainly two ways to execute same-day buy and sell: cash-based day trading and margin trading.

Cash-Based Day Trading: Lightweight Day Trading Solution

Cash-based day trading involves using one’s own funds for same-day transactions, without borrowing money or stocks from brokers. This method is relatively simple and straightforward.

Account Opening Requirements:

• Opened with a broker for at least 3 months (no restriction on the same broker)
• More than 10 buy/sell transactions in the past year
• Signed risk disclosure and same-day cancellation agreement

Operation:

• Bullish: Buy stocks within the day → Sell stocks within the day
• Bearish: Sell stocks within the day → Buy stocks within the day

Transaction Costs:

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

Margin Day Trading: Leveraged Day Trading Solution

Margin day trading involves borrowing funds or stocks from brokers to execute same-day buy and sell. Borrowing money is called margin trading, borrowing stocks is called short selling.

Account Opening Requirements:

• Opened with a broker for at least 3 months (no restriction on the same broker)
• More than 10 buy/sell transactions in the past year
• Trading amount over NT$250,000 in the past year
• Need to open a credit account

Operation:

• Bullish: Margin buy within the day → Short sell stocks
• Bearish: Short sell stocks within the day → Margin buy

Transaction Costs:

• Stamp duty: 0.3%
• Commission (buy/sell): 0.1425%
• Loan interest rate (average): 0.08%

Current Status and Trends of Taiwan Stock Day Trading Market

Since Taiwan opened cash-based day trading in 2014, this trading method has become an important part of the market. Approximately 40% of Taiwan stock trading volume comes from day trading, with the number of participants increasing year by year, indicating investors’ strong desire for short-term trading opportunities.

Investors’ interest in day trading mainly stems from the temptation to profit quickly from market volatility and to avoid overnight holding risks.

Advantages of Day Trading

1. Timely Stop-Loss and Exit
Investors can close positions within the day, significantly reducing risk exposure. If a misjudgment occurs, they can stop losses immediately, preventing small losses from turning into larger ones.

2. High Capital Efficiency
Day trading involves a buy-and-sell settlement system, which allows faster capital turnover compared to traditional T+2 settlement, making it a relatively low-cost trading approach.

3. Avoid Overnight Risks
Stock markets can experience unexpected events outside trading hours (market news, geopolitical issues, economic data, etc.), leading to gaps at the next opening. Day trading can completely avoid such overnight risks.

Risks and Hidden Dangers of Day Trading

1. Leverage Traps
Many investors are attracted by the concept of “no capital day trading,” but this practice essentially involves using financial leverage. Leverage amplifies profits but also magnifies losses. Investors lacking risk tolerance may face huge debts if they lose.

2. Excessive Leverage Leading to Losses
Investors often use leverage multiples beyond their capacity. Coupled with misjudgments or delayed stop-loss, this can cause substantial losses. Even with correct judgment, early liquidation due to leverage pressure can limit gains and result in large losses.

3. High Transaction Costs
Frequent trading incurs costs such as commissions and stamp duties. If transaction costs are too high, even small price movements may not cover costs, leading to losses.

4. Time and Effort Intensive
Day trading requires investors to monitor the market for extended periods, analyze individual stocks, indices, related sectors, track capital flows, and real-time news. Compared to swing trading, day trading demands much more effort.

Other Financial Products Supporting T+0 Trading

Besides stock day trading via margin trading, some derivatives markets inherently support T+0 trading, with varying costs and complexities.

Futures Trading

Futures are contracts where both parties agree to buy or sell a specific quantity of underlying assets at a predetermined price within a certain period. About 96% of futures market participants are speculators.

Features: Futures are naturally T+0, allowing same-day buy and sell. They are characterized by high leverage and support for two-way trading.

Account Opening Requirements: Sufficient margin deposit, typically tens of thousands of NT dollars.

Transaction Costs:

• Transaction tax: 0.02% of NT$100,000
• Various fees: approximately NT$30 (depending on the underlying asset)

Options Trading

Options are derivatives based on futures, where the holder has the right, but not obligation, to buy or sell securities at a specified price within a certain period.

Features: Options are inherently T+0, tradable within the same day. The key difference from futures is that the exercise is optional; the right is held by the buyer.

Account Opening Requirements: Trading units are based on contracts, with only a small premium (a few thousand NT dollars) needed to trade.

Transaction Costs:

• Transaction tax: 0.1%
• Various fees: around NT$10–NT$20

Contracts for Difference (CFD)

CFD is an agreement between the client and broker, where the investor deposits margin to trade an underlying asset, earning the difference between buy and sell prices. CFDs are OTC products, with no ownership of the underlying asset, and can theoretically be held indefinitely.

Features: CFDs are inherently T+0, allowing same-day buy and sell. Underlying assets include forex, gold, stock indices, individual stocks, oil, cryptocurrencies, etc.

Account Opening Requirements: Very low threshold, starting from tens to hundreds of USD.

Transaction Costs: Spread (varies by product)

Comparison Table of Costs and Risks for Five Daily Trading Methods

How to Conduct Stock Day Trading

Stock day trading is relatively simple and intuitive:

Step 1: Determine Market Direction

• Bullish: Buy within the day → Sell within the day
• Bearish: Sell within the day → Buy within the day

Step 2: Choose Trading Instruments
Select cash-based, margin, or derivative trading based on your capital and risk tolerance.

Step 3: Perform Technical Analysis
Analyze price trends, support/resistance levels, volume, and other technical indicators to identify entry and exit points.

Step 4: Place Orders
Buy or sell at appropriate prices based on analysis, and set stop-loss orders to keep risks manageable.

Step 5: Implement Risk Control
Always set stop-loss levels to ensure losses per trade stay within acceptable limits.

Common Questions About Day Trading

Q: Can odd-lot stocks be bought and sold on the same day?
A: No. In Taiwan, odd-lot stocks are not available for margin trading, whether during or after trading hours. They can only be sold the next day at the earliest.

Q: Which stocks in Taiwan can be day traded?
A: Currently, about 200 stocks including Taiwan 50 Index, Mid-Cap 100 Index components, and OTC Taiwan Top 50 Index components can be day traded. Additionally, options, futures, and CFDs that support T+0 are also available.

Q: When is the best time to perform day trading?
A: Day trading is usually done over short periods, most active during market open, close, or when significant news occurs.

Conclusion

Stock day trading suits short-term investors who aim to profit quickly from market volatility or avoid overnight risks. While the cost of same-day settlement is relatively low, it requires investors to monitor the market extensively. Poor judgment or inadequate risk management can lead to losses or even margin calls due to insufficient funds.

Investors should choose whether to engage in day trading based on their ability and risk tolerance, and establish clear trading rules and risk management strategies.