Trade in both Taiwan stocks and US stocks—is day trading really suitable for you? A complete guide for beginners on day trading tips and risks

What is the essence of day trading?

In the stock market, “day trading” refers to completing buy and sell transactions within the same trading day. That is, you buy a stock in the morning and must sell it before the market closes to settle the position. Conversely, you can also sell first and buy back later, as long as you ensure no overnight position remains at the end of the day.

This trading method has become a trend in the Taiwan stock market. Since the Financial Supervisory Commission opened up day trading in 2016, related trading volume has accounted for nearly 40% of Taiwan stock market turnover. In comparison, the US stock market, with its T+0 system, inherently supports same-day buy and sell, giving investors greater flexibility.

Why are investors so keen on day trading? Three main attractions analysis

Avoid overnight risk is the primary advantage of day trading. Taiwan stock trading hours are from 9:00 AM to 1:30 PM, during which overseas market movements in Hong Kong, Europe, and the US often influence prices. If significant news emerges the night before, the opening can gap up or down, turning previously promising stocks into losses. Using a day trading strategy eliminates this risk because positions are settled by the close.

High capital turnover efficiency is the second attraction. You can enter and exit multiple times within the same day, only risking the spread, which can significantly improve capital utilization. Plus, day trading usually only requires paying the spread (not the full amount), effectively amplifying your trading power.

Leverage effect is obvious as the third factor. Because you only need to pay a portion of the total amount, you can operate larger positions. Taiwan stock margin trading requires about 50% initial margin, providing roughly 2x leverage, which is very attractive for investors seeking to maximize returns with small capital.

Hidden traps behind day trading you must know

On the surface, it seems profitable, but day trading hides many risks that require serious attention.

Transaction fees and taxes can significantly eat into profits. Although the government offers a “half reduction” in transaction tax for day trading, high-frequency trading costs can still be substantial over time. For example, if you make 5 trades a day, each with a principal of NT$100,000, earning only 0.5% (NT$500) per trade, after deducting fees and taxes, net profit might only be NT$100-200. A small loss on one trade can offset previous gains, leading to a long-term cycle of “profit from spread, loss from costs.”

Short-term volatility brings high pressure. Taiwan stocks often fluctuate 1-2% intraday due to foreign institutional trading, major announcements, or overall sentiment. For day traders, these swings can determine the success or failure of a single trade within minutes. This means you need to watch the screen for extended periods, quickly judge market direction, and precisely set stop-loss and take-profit points. Slight delays can cause missed opportunities or mistakes, creating significant psychological stress.

Leverage is a double-edged sword. When you use margin or short selling, both gains and losses are magnified. For example, buying NT$200,000 worth of stock with NT$100,000 margin results in a 5% decline leading to a NT$10,000 loss, which is 10% of your principal. In extreme cases like hitting the limit down or up, losses can escalate further, even requiring broker margin calls.

Easy to become addicted and unable to stop. The immediate feedback mechanism of day trading can lead to addictive behavior, gradually turning into reckless trading based on feelings rather than strategy. Small consecutive losses or a big loss can wipe out your capital, consuming time and effort, and deviating from your original investment plan.

Are you suitable for day trading? Five self-assessment questions

Day trading is a high-difficulty, high-risk operation, not suitable for all investors. Ask yourself:

Ample time and focus. Day trading requires quick decision-making during market hours. Without full attention, you risk missing entry and exit points. Usually unsuitable for working professionals or distracted traders.

Strict discipline and execution. You must set stop-losses and stick to them, avoiding gambling mentality; also, control position sizes to keep risks within manageable limits.

Stable psychological quality. Intraday prices can swing wildly every minute. If you are easily influenced by emotions (panic selling, greed chasing highs), it becomes very dangerous.

Basic analysis skills and experience. You need to understand intraday charts, volume-price relationships, and use tools like moving averages, candlesticks, support/resistance levels. Without these, jumping in is just paying tuition with your capital.

Sufficient capital capacity. Day trading is not a reliable profit tool but a speculative method to maximize small capital. Insufficient funds and high leverage can lead to margin calls and liquidation, so enough capital is essential to withstand losses.

What are the specific methods of day trading?

Investors can choose from various day trading approaches, each with its characteristics:

Spot stock day trading is unique to Taiwan. Currently, over 1,600 stocks support this operation, and it is what most people refer to as “day trading.”

US intraday trading involves closing positions within the same trading day. A stock bought and sold within one day. The US has the PDT rule: with less than $25,000, you can only day trade up to 3 times in 5 days; with over $25,000, unlimited.

Margin and short selling day trading includes two types: margin trading involves borrowing money to buy and selling within the same day; short selling involves borrowing shares to sell and buying back the same day. Be aware of additional interest or borrowing costs, and the risk of short squeeze during hot stocks, which can increase costs significantly.

Derivatives day trading includes stock index futures, options, single-stock futures, and options, all within a single trading day. Many short-term traders prefer using Taiwan index futures for their leverage and relatively low costs.

Algorithmic/high-frequency trading relies on computer algorithms to determine entry and exit points, aiming for small profits from high-frequency trades. Costs are low, but technical skills are high, making it difficult for retail traders to participate.

Comparison of day trading rules: US vs Taiwan

Practical calculation of day trading costs

Taiwan stock cost estimate: Buying 100 lots of TSMC (10 million shares) at NT$600 each

• Transaction amount: 600 × 100,000,000 = NT$60 billion
• Broker fee (0.04275%): NT$60 billion × 0.04275% = NT$25,650,000
• Day trading tax (0.075%): NT$60 billion × 0.075% = NT$45 million
• Main cost is the transaction tax

US stock cost estimate: Buying 1,000 shares of NVIDIA at $1,000 each

• Transaction amount: $1,000 × 1,000 = $1,000,000
• Broker fee: $0 (most brokers offer free commissions)
• SEC/FINRA fee: $0.000145 × 1,000 = $0.145
• Total cost less than $1, but watch out for spread, slippage, and borrowing interest

Three steps for practical day trading: from stock selection to execution

Step 1: Select suitable stocks for day trading

Not all stocks are suitable; key is “popularity” and trading volume. You can filter through:

News and themes are crucial. Media reports often attract large investor attention. Whether positive or negative, they can amplify intraday volatility, creating opportunities.

Institutional research signals. If a stock suddenly receives a research report from institutions, it may trigger institutional buying or selling, which is important for day traders.

Clear quantitative data. Observe strong stocks, weak stocks, turnover rate, trading volume rankings. Pay special attention to stocks with “trading volume suddenly increased” (more than 50% above the 5- or 10-day average), often indicating opportunities.

Step 2: Determine trading direction and entry timing

Day trading can go long or short. Going long involves “trend-following” or “buying on pullback.”

Closely monitor previous lows and opening prices, then observe 5-minute K-line charts (not daily). When going long, watch the overall market momentum; if the market weakens, the stock may be affected; if the stock outperforms the market, consider holding until the previous high before selling.

For shorting, a bearish sentiment is needed. For example, if a sector is negatively affected by policy changes, shorting related stocks has fundamental support. Use 5-minute charts to decide on position adjustments based on market and stock strength.

Step 3: Set discipline, stick to stop-loss and take-profit

Discipline is the most tested aspect of short-term day trading. The most common mistake is delaying exit.

Timely take profit and cut losses, never procrastinate. It’s hard to buy at the lowest and sell at the highest, so pre-set exit points are essential. Usually, a 5% take-profit and 2-3% stop-loss are reasonable. Avoid waiting until near market close to exit, as it may not execute or stocks may become unsettled, leading to forced liquidation or large sell-offs.

Solid capital management. Although positions are closed daily, misjudging market direction may lead to overnight holding. Ensure sufficient funds to handle potential losses.

Decisive and non-greedy mindset. Enter decisively, exit decisively. Whether profit or loss, learn to exit promptly. Don’t be trapped by “there’s still more to earn” thoughts, to maximize capital protection.

Recommended hot stocks for day trading in 2025

Top 10 Taiwan stocks suitable for day trading (by average daily trading volume):

• TSMC (2330): NT$3 trillion
• Kang Pei (691): NT$20 billion
• Chuan Lake (2059): NT$801.8 billion
• Innolux (5371): NT$1.9721 trillion
• Creative (3443): NT$188.2 billion
• Zhen Ding-KY (4958): NT$1.6326 trillion
• TECO (1504): NT$1.9053 trillion
• Guang Yu (2328): NT$2.7726 trillion
• Solomon (2359): NT$539.8 billion
• Hon Hai (2317): NT$4.9552 trillion

Top 10 US stocks suitable for day trading (by average daily trading volume):

• Intel (INTC): $103.745 million
• Tesla (TSLA): $98.241 million
• NVIDIA (NVDA): $175.023 million
• AMD (AMD): $56.632 million
• Gilead Sciences (GILD): $75.258 million
• Amazon (AMZN): $41.339 million
• ExxonMobil (XOM): $25.10 million
• Meta (META): $11.943 million
• Microsoft (MSFT): $19.889 million
• Alphabet Class C (GOOG): $24.419 million

These stocks have active daily volume and liquidity, suitable for short-term day trading.

Final thoughts: Is day trading right for you?

Day trading is fundamentally a trading style, not a simple shortcut to wealth nor a guaranteed way to lose money. Its advantages include avoiding overnight international market swings, improving capital turnover, and amplifying gains; its disadvantages include high costs, psychological pressure, and risk of losing control.

Taiwan stock trading involves paying fees and taxes, making costs relatively high, leading many investors to seek opportunities in US stocks. Regardless of the market, the key is to start with small capital to gain experience, then decide whether to operate long-term. Successful day trading requires time, discipline, mental resilience, and sufficient capital—none can be missing.