Can stocks be sold before settlement? A complete guide to T+0 day trading and same-day settlement

Core Concepts of Stock T+0 Day Trading

Can stocks be bought and sold on the same day? The answer is yes, this is what is commonly referred to in the market as T+0 day trading or intraday offset.

Many investors feel constrained by the traditional T+2 trading rule—stocks bought today can only be sold after two days. This delay not only risks missing market opportunities but also exposes traders to overnight holding risks. However, through specific trading methods, investors can indeed buy and sell on the same day without waiting for the settlement cycle.

The essence of day trading is: completing both buy and sell transactions within the same trading day, leveraging broker-provided margin trading and securities lending services, to achieve a T+0 trading experience under the T+2 settlement system. In simple terms, even if the Taiwan stock market adopts a T+2 settlement system (settlement occurs two trading days after the transaction), investors can, with broker assistance, complete a full buy-sell cycle today and profit from the price difference.

This may sound like skirting legal boundaries, but it is fully compliant. Brokers act as liquidity providers, charging margin interest and commissions, while investors can execute multiple trades of the same stock within a single day.

Spot Stock Day Trading vs. Margin & Securities Lending Day Trading: Differences in Implementation

Although both are intraday offset strategies, they differ based on whether broker funds are borrowed:

Spot Stock Day Trading: Using Own Funds for Same-Day Trading

Spot stock day trading refers to investors using only their own funds and holdings to buy and sell within a single trading day. This is the simplest form of day trading, involving no borrowing of money or stocks from brokers.

Operational logic is straightforward:

• Bullish view: buy spot stocks today, sell them today (long position)
• Bearish view: sell spot stocks today, buy them today (short position)

Account opening requirements are relatively lenient:

• Broker account opened for over three months
• At least 10 transactions in the past year
• Signed risk acknowledgment and intraday offset agreement

Cost structure:

• Securities transaction tax: 0.15% of transaction amount
• Commission: 0.1425% of transaction amount (charged on both buy and sell)

Margin & Securities Lending Day Trading: Leveraged Same-Day Trading

This involves borrowing funds or stocks from brokers. Borrowed funds are used to buy stocks (“margin trading”), and borrowed stocks are used for short selling (“securities lending”). This method amplifies trading scale but also increases risk and costs.

Operational approach:

• Bullish: borrow funds to buy + borrow stocks to short sell (amplify long)
• Bearish: borrow stocks to short + borrow funds to buy (amplify short)

Account opening conditions are stricter:

• Broker account opened for over three months
• At least 10 transactions in the past year
• Total transaction amount in the past year not less than NT$250,000
• Need to open a margin account

Cost structure is more complex:

• Securities transaction tax: 0.3% of transaction amount (double that of spot trading)
• Commission: 0.1425%
• Margin interest rate: approximately 0.08% annually

The Complete Answer to “Can Stocks Be Sold Before Delivery?”

Many beginners are confused: Can I sell stocks before they are settled?

The answer depends on the trading method:

If using spot stock day trading or margin & securities lending day trading: Yes, you can. In fact, the entire logic of day trading is based on “selling before settlement.” You buy at 10:00 today, sell at 2:00 pm, and even though settlement occurs two days later, the transaction cycle is complete. From a settlement perspective, the buy and sell offset each other, and the broker’s stock inventory remains unchanged, but they charge double the fees.

If using regular T+2 trading: No. Stocks bought today cannot be sold before the second trading day after the transaction, as mandated by the exchange. If you buy a stock today, you must hold it until after tomorrow’s close before selling.

The Appeal and Practical Considerations of Day Trading

Since Taiwan opened spot stock day trading in 2014, this trading method has rapidly gained popularity. Currently, nearly 40% of Taiwan stock daily trading volume comes from day traders, with participant numbers increasing year by year.

Why are investors attracted to day trading?

Advantage 1: Freedom to stop loss promptly
In traditional trading, if you misjudge or the market suddenly reverses, you can only sell the next day, risking larger losses. Day trading allows immediate closure—if wrong, you can close positions instantly, avoiding overnight gap risks.

Advantage 2: Efficient capital circulation
Since buy and sell are settled within the same day, day trading offers high capital efficiency. Normally, stock trading requires two days before funds from sales can be used to buy other stocks, but day trading allows multiple rounds of buying and selling within a single day, theoretically reusing capital.

Advantage 3: Avoiding overnight holding risks
If unexpected international events, after-hours news, or overseas market drops occur, holding stocks overnight can lead to gaps at the next open. Day trading completely avoids this risk.

Risks and Costs Must Not Be Overlooked

Cost 1: Fees erode profits
The fee structure for day trading is more complex. For example, margin trading involves a 0.3% transaction tax, 0.1425% commission, and margin interest (~0.08% annually), totaling over 0.5%. This means you need to earn at least a 0.5% profit to break even, which is not always easy in short-term volatility.

Cost 2: Leverage traps
Margin trading is inherently leveraged. Many investors are tempted by “small capital, large trades,” but overlook that leverage also magnifies losses. A 10% decline under leverage can cause 50% or greater losses.

Cost 3: Time and effort
Day trading requires investors to monitor the market all day. Even fundamentally strong stocks can experience high open/low swings or low open/high swings. This demands real-time attention to stock movements, market trends, sector linkages, capital flows, and news. Compared to swing traders who analyze over weekends, day traders face a much heavier workload.

Cost 4: Psychological pressure and risks
High-frequency trading can lead to overtrading. Even if the judgment is correct, greed or panic may cause repeated position adjustments, resulting in losses. Additionally, if funds are insufficient for settlement, investors face default risks and extra penalties.

Other Trading Instruments That Can Be Traded on the Same Day

If you find T+0 via margin & securities lending too complex or costly, other financial products offer more straightforward solutions. These instruments are inherently T+0, requiring no broker mediation.

Futures Trading: The Largest Leverage Day Trading Tool

Futures are standardized contracts where buyers and sellers agree to deliver a specified quantity of goods or assets at a future date at a set price. About 96% of futures market participants are speculators aiming to profit from price fluctuations.

Key features:

• Naturally T+0, can buy and sell multiple times in a day
• Leverage typically 1:10 to 1:20, requiring full margin deposit
• Must settle at expiration; cannot hold indefinitely
• No ownership of underlying assets, only rights under the contract

Cost components:

• Transaction tax: 0.02%
• Commission: around NT$30 (varies by underlying)

Account opening requirements: Usually need tens of thousands of NT$ in margin to start trading one contract.

Options Trading: More Flexible Risk Hedging Tool

Options are contracts granting the holder the right (not obligation) to buy or sell an asset at a specified price within a certain period. Unlike futures, options give the holder a choice—exercise or abandon.

Key features:

• Naturally T+0, can buy and sell on the same day
• Traded on exchanges or OTC, liquidity varies
• Only pay a premium (much less than margin for futures)
• Maximum loss for buyers is the premium paid; sellers face larger risks

Cost components:

• Transaction tax: 0.1%
• Commission: around NT$10+ per trade

Account opening requirements: Pay a few thousand NT$ for the premium, much lower than futures.

Contracts for Difference (CFD): The Most Flexible Derivative Trading

CFD is an over-the-counter contract between investors and brokers. Investors pay a margin and speculate on the price movement of an asset, earning the difference. CFDs cover a wide range of underlying assets—forex, gold, indices, stocks, oil, cryptocurrencies, etc.

Key features:

• Naturally T+0, can hold positions indefinitely or close within the day
• Extensive underlying asset options
• Flexible leverage, very low entry thresholds (tens to hundreds of dollars)
• Counterparty risk: broker is the opposite party, no exchange settlement involved

Cost components:

• Mainly spreads (difference between buy and sell prices)
• Varies greatly depending on the underlying

Account opening requirements: Almost no barrier; can open online immediately.

Comprehensive Comparison of Five Daily Trading Methods

Practical Workflow of Day Trading

Regardless of the method chosen, the basic steps are similar:

Step 1: Select the trading target
Choose liquid, volatile stocks. For Taiwan stocks, day trading is limited to Taiwan 50 Index, Mid-cap 100 Index components, and FTSE Taiwan 50 Index components, totaling about 200 stocks.

Step 2: Market analysis and judgment
Within minutes to hours, perform technical, fundamental, and sentiment analysis. Requires sharp intuition and experience.

Step 3: Place orders

• Bullish: click buy/long to establish a long position
• Bearish: click sell/short to establish a short position

Step 4: Set risk management
Most critical step—set stop-loss points to limit losses. Even with correct judgment, lack of patience or poor stop-loss can lead to premature exit due to short-term swings.

Step 5: Close positions before end of day
Close all positions before market close to realize a “full intra-day cycle,” avoiding overnight risks.

Common Q&A

Q: Can odd lots be used for day trading?
No. Odd lots (less than 1000 shares) do not support margin trading and can only be sold the next day. Day trading requires trading in whole lots (each 1000 shares).

Q: Are there special restrictions for US stock day trading?
Yes. The SEC limits the number of intraday trades to three per five business days for accounts with less than $25,000 assets. Exceeding this results in a 90-day restriction. Accounts over $25,000 are unrestricted.

Q: When is the best time for day trading?
Typically, the first 30 minutes after opening and the last hour before close are most active, with high volatility and volume. Major news can also increase volatility but with higher risk. Midday (11 am–1 pm) is usually quieter and less suitable.

Q: Is day trading always more profitable than swing trading?
Not necessarily. Although day trading involves high frequency, costs are higher, and success rates are often lower than swing trading. Many traders see profits eroded by fees and overtrading. Psychological stress and mistakes also reduce suitability for everyone.

Conclusion

Can stocks be sold before settlement? Yes, but only through specific trading methods. Both spot stock day trading and margin & securities lending day trading provide ways to achieve T+0 trading under the T+2 settlement system. Derivatives like futures, options, and CFDs are inherently capable of multiple trades within a day.

Day trading offers opportunities for short-term traders to avoid overnight risks, but it demands: sharp market judgment, strict risk management, sufficient capital, and strong mental resilience.

Costs, leverage, time commitment, and psychological pressure are critical factors to consider before engaging in day trading. Blindly jumping into the market often results in costs eating profits, leverage amplifying losses, or exhaustion from overtrading.

Before attempting day trading, ensure you fully understand the risks involved and have adequate funds and mental preparedness to handle potential losses.