Short-term day trading stocks: A practical guide to Taiwan and US stocks and a recommended list of day trading stocks

Short-term trading has become popular in the market, with an increasing number of investors leveraging “day trading” to seize intraday volatility opportunities. From Taiwan stocks to US stocks, day trading has become a primary method for many active traders. This article will analyze the core operational logic, risk control principles, and how to accurately select suitable stocks for day trading from a practical perspective.

Quick Overview of Core Concepts in Day Trading Stocks

Day trading refers to completing the buying and selling of stocks within the same trading day, ensuring all positions are closed before market close. It specifically includes two forms:

Buy-day trading — Buying a stock in the morning and selling it during the day for profit
Sell-day trading — Short selling via margin loan first, then buying back to close the position

Since Taiwan’s Financial Supervisory Commission opened up cash-based day trading in 2016, market trading volume has surged significantly, with day trading accounting for nearly 40% of total Taiwan stock market transactions. In contrast, the US stock market operates under a T+0 system, allowing investors greater flexibility for intraday trading.

Why Has Day Trading Become the Mainstream Choice?

Avoid Overnight Risks
Taiwan stocks are often influenced by international markets such as Hong Kong, Europe, and the US during trading hours. If major news breaks overnight, a bullish stock may open significantly lower the next day. Day trading allows traders to complete buy and sell transactions within the trading day, leaving no holdings overnight, thus completely avoiding risks from unexpected international market events.

Turnover Rate Multiplied
Multiple entries and exits within the same day are possible, with each trade only risking the price difference. Ideally, capital utilization is greatly improved, and profit potential expands accordingly.

Leverage Amplification Effect
Since day trading only requires paying the spread margin, trading scale can far exceed the actual capital. In Taiwan, initial margin for margin trading day trading is about 50% (i.e., 2x leverage). When the market moves favorably, profits can be quickly magnified.

Hidden Costs of Day Trading Stocks

The gap between ideal and reality often exists. Although day trading seems to offer broad profit space, hidden costs can erode most of the gains:

Transaction Fees and Taxes Eating Into Profits
Even with government incentives like halving transaction taxes for day trading, frequent transactions still incur significant costs. For example, in Taiwan stocks, if you make 5 trades in a day, each with a principal of NT$100,000 and a profit rate of only 0.5% (NT$500), after deducting fees and taxes, net profit might only be NT$100-200. A small loss on one trade can wipe out earlier gains, leading to a long-term situation of “profit from spread, loss from costs.”

High-Intensity Decision-Making Pressure from Short-Term Fluctuations
Taiwan stocks often fluctuate 1%-2% intraday due to foreign investor activity, industry news, and market sentiment. Such volatility can determine the outcome of a single trade within minutes, requiring traders to stay focused and make precise judgments on market direction and exit timing in a very short period. Under high pressure, hesitation or impulsive decisions are common, especially for less experienced traders, and the risks from short-term volatility often outweigh potential gains.

Leverage as a Double-Edged Sword
Many investors use margin (long) or short selling to amplify trading scale, but leverage is a double-edged sword. For example, with NT$100,000 principal, buying NT$200,000 worth of stocks, a 5% decline results in a NT$10,000 loss (10% of principal). In extreme situations (e.g., hitting limit up/down and unable to close position), losses can escalate further, even leading to forced liquidation by brokers.

Trading Addiction and Capital Erosion
The immediate profit feedback from day trading can easily trap investors into short-term thrill-seeking. Many evolve from “experimental trading” to “frequent trading,” disregarding market rhythm and placing orders based on feelings. Over time, this leads to accumulated small losses or a single large loss, consuming time and energy, and gradually eroding capital, straying from original investment goals.

Who Is Suitable for Day Trading Stocks?

Day trading is not suitable for all investors. The following five types of people have relative advantages:

1. Full-time traders or freelancers with ample time — Day trading requires quick decision-making during market hours. If unable to focus during trading, missing entry or exit points can lead to losses. Office workers unable to monitor the market should avoid involvement.

2. Those with strict trading discipline and risk management skills — Must set stop-loss and stick to it; avoid gambling on a single trade; also control position size precisely to manage risk.

3. Those with strong stress resistance and quick decision-making — Intraday movements can be large within minutes. If emotions are easily affected (panic selling, greed chasing), it can be very dangerous.

4. Investors with solid experience and technical analysis skills — Day trading is a professional activity requiring the ability to interpret intraday charts, volume-price relationships, and use tools like moving averages, candlestick patterns, support/resistance levels. Beginners should not jump in blindly; using capital as tuition.

5. Those with sufficient funds and risk tolerance — Day trading is a high-risk, high-reward speculative approach. If capital is too small and leverage is high, the margin of error is very low, risking quick liquidation. Suitable for investors with ample capital.

Overview of Day Trading Methods

Cash-based day trading — Taiwan’s proprietary system

Taiwan’s day trading refers to cash-based trading, with over 1,600 stocks available for day trading. Operations are straightforward, requiring no margin or securities borrowing.

US Stock Intraday Trading (Day Trading)

US day trading refers to closing positions within the same day, without holding overnight. It is regulated by the Pattern Day Trader (PDT) rule: with less than $25,000, a maximum of 3 day trades within 5 trading days; with over $25,000, unlimited day trades are allowed.

Margin and Securities Borrowing Day Trading

Margin day trading — buying on margin and selling within the same day; securities borrowing day trading — short selling borrowed stocks and buying back the same day. Be aware that margin and securities borrowing incur additional interest or borrowing fees, and popular stocks may face short supply risk, significantly increasing trading costs.

Derivatives Day Trading

Involves executing financial derivatives contracts within a trading day, including stock index futures, options, single-stock futures, and options. Short-term traders often use Taiwan index futures for day trading due to leverage and low costs.

Algorithmic/High-Frequency Day Trading

Using automated computer algorithms to identify buy/sell points, focusing on small profits from high-frequency trades. Costs are low but technical requirements are high; retail traders generally find it difficult to implement.

Comparing Taiwan and US Stock Day Trading: Rules and Choices

Common Questions About US Stock Day Trading

How many times can I day trade stocks in one day?
No explicit limit; can trade multiple times based on market conditions. However, frequent intraday trading requires meeting specific capital and regulatory requirements. Some brokers may charge extra or impose restrictions on high-frequency trading.

What is the best timing for day trading stocks?
Optimal times are when the market is highly active and volatile, typically at market open, close, or around major news releases and economic data announcements.

Detailed Breakdown of Day Trading Fees

Day trading fees include broker commissions and securities transaction tax. Broker fees are usually about 0.1425% of the purchase amount, with a minimum of NT$20. The securities transaction tax is levied by the government; for cash-based day trading, it is halved to 0.075% (from 0.15%).

Example of Taiwan Stock Day Trading Cost Calculation

Suppose buying 100 lots of TSMC (10 million shares) at NT$600:

• Total transaction amount = NT$600 × 10,000,000 = NT$6 billion
• Broker fee (assuming 30% discount) ≈ NT$6 billion × 0.04275% = NT$25,650
• Securities tax (halved for day trading) ≈ NT$6 billion × 0.15% = NT$900,000

Main costs are concentrated in the transaction tax.

Example of US Stock Day Trading Cost Calculation

Suppose buying 1,000 shares of NVIDIA(NVDA) at $1,000:

• Total transaction amount = $1,000 × 1,000 = $1,000,000
• Broker fee: $0 (many brokers offer commission-free trading)
• SEC/FINRA fees ≈ $0.000145 × $1,000,000 = $145

Total cost is less than $1, but traders should also consider spread, slippage, borrowing interest, and other hidden costs.

Practical Steps for Day Trading Stocks

Day trading involves high risk but also high reward. It’s recommended to start with small capital to test the waters before scaling up. Here are three practical steps based on experience.

Step 1: Precisely select day trading stock targets

Success or failure in day trading first depends on stock selection. From thousands of stocks, focus on “hot stocks” rather than obscure stocks with low volatility and trading volume. Key selection methods include:

Tracking News and Sentiment
Media reports are primary information sources, attracting investor attention. Whether positive or negative, news can amplify daily volatility and create trading opportunities.

Institutional Research Reports
When institutional research reports appear suddenly, they often influence large investors to increase or decrease holdings. Monitoring these large fund movements is crucial for day traders.

Quantitative Data Signals
Observe rankings of strong stocks, weak stocks, turnover rates, and trading volume. Pay special attention to stocks with “trading volume suddenly surges” (more than 50% above the 5- or 10-day average). Combining news and data helps determine the trading direction.

Step 2: Accurately judge market direction and timing

Day trading can go long or short. Long positions can follow “trend chasing” or “buying on pullback support.”

Long Strategy
Focus on previous lows and opening prices, especially on 5-minute charts (each bar representing 5 minutes), different from daily K-line charts used in swing trading. Also, monitor overall market momentum; when the market weakens, stocks tend to be affected. If a stock is significantly stronger than the market, consider holding until previous highs for exit.

Short Strategy
Requires a bearish market environment. For example, if the Chinese market is bearish on Chinese concept stocks, shorting related themes during intraday can be considered. Use 5-minute charts; when the market weakens but the stock outperforms, consider timely covering.

Step 3: Strictly adhere to trading discipline

Cash-based day trading is ultra-short-term, demanding high overall capability. Discipline is paramount: set profit targets, stop-loss, and manage capital carefully.

Immediate profit-taking and stop-loss, exit early
Achieving the perfect buy at the lowest point and sell at the highest is difficult. While selecting stocks carefully, prepare for stop-loss. Setting a profit target of about 5% and a stop-loss of 2-3% is reasonable. More importantly, avoid waiting until near market close to sell; late selling may result in unfilled orders or forced holding, risking being stuck with stocks at costs below current prices.

Capital management and position control
Day trading involves buying and selling within the same day, but positions can go wrong. Sufficient funds are necessary to start trading. Trade only with what you can afford to lose; avoid excessive leverage.

Mindset cultivation: decisiveness and restraint
The two most important mentalities in cash-based day trading are decisiveness and restraint. Decisiveness means entering quickly when opportunities arise; restraint means exiting promptly regardless of profit or loss, avoiding greed or hesitation. Only with this balance can losses be minimized and gains secured.

2025 Recommended List of Day Trading Stocks

Below are stocks with high trading volume, liquidity, and suitability for day trading in Taiwan and the US.

Taiwan Stocks Recommended for Day Trading

(Source: Yahoo Finance Taiwan)

US Stocks Recommended for Day Trading

(Source: Yahoo Finance Taiwan)

These stocks have active daily trading volume, high liquidity, and moderate volatility, making them ideal for short-term day trading.

Final Reflection on Day Trading Stocks

Day trading is a trading approach that can increase capital turnover and avoid overnight international market risks. However, it also carries risks: investors may blindly increase leverage for quick profits, enlarging risk exposure, or experience sudden sharp movements in international markets overnight, causing gaps at open the next day, leading to missed spreads.

Taiwan stock trading incurs transaction fees, and selling also involves paying transaction taxes, making costs relatively high. Many investors prefer US stocks for day trading due to their T+0 system and lower tax structure, reducing costs.

Regardless of choosing Taiwan or US stocks for day trading, success hinges on: disciplined execution, risk management, and stable mindset. Even with many recommended stocks, the most important factor remains the trader’s own execution ability.