What is BTST Trade and its strategy in Stock Market?
What is BTST Trade and its strategy in Stock Market?
What is BTST Trade?
BTST full form is “Buy Today Sell Tomorrow” whereas BTST trading means that you have to buy shares and compulsorily sell them tomorrow. BTST Trading strategy by which traders take advantage of short-term market volatility in their favor by buying shares today and selling them tomorrow.
Securities on which BTST applies on
BTST as a trading strategy is used while dealing in equity and futures and options.
Features and Important terms of BTST Trading
- Settlement Cycle: A settlement cycle in BTST trading strategy is the time period taken for the completion of a trade deal which means that upon the completion of the settlement cycle, the buyer of the securities will get the delivery of shares and the seller will receive the funds.
Initially, there were mainly two types of settlement cycles T+1 and T+2 in the stock market but from 27-jan-2023 there is only T+1 settlement cycle that is active. After China India is the only one who starts the T+1 settlement cycle for delivering stocks.
- T+1 trade cycle - Initially T+1 settlement cycle is used in the case of Equities but from January 27, 2023, it used in all kind of trading. Here T is the Trade date at which the buy or sell order is placed and T+1 are the days taken to complete the trade deal.
For example, if the buyer places a buy order on Monday, then the shares will be credited to his account by Tuesday and seller will receive the funds on Tuesday as well.
2). Cash and Carry: It is also called basis trading, where the basis is the difference between the spot price of an asset and its futures price. Essentially, the goal of the strategy is to manipulate the price difference in order to make a profit.
For example, In normal trading, once you place a buy order and there is an appreciation in the value of shares on the same day, you cannot sell the shares as you can only do that only once you receive those shares in your Demat account after T+1 days.
But in this case, btst means, you can place a sell order for up to 2 trading days, after placing a sell order to gain profit from a change in the value of shares.
- BTST in trading as a service is not provided by most of the brokers to SME companies.
- The Trade to Trade segment does not permit BTST trading strategy in stock markets, since the stocks are extremely speculative, a CNC order is mandatory.
You also need to know How can you differentiate between BTST and Intraday?
Charges on BTST Trades
There are mainly two ways by which you could be charged depending upon what is its BTST trades category:
- BTST trade charges as per Intraday Trading - If you buy shares on T day and place the sell order on the same day, then it would be considered Intraday trading and you will be charged by your broker as per Intraday brokerage charges. know How To Start Intraday Trading
- BTST trade brokerage charges as per T+n days - If you buy shares on T day and sell those shares on T+1, or T+n days, then in such cases, your broker will charge you equity delivery brokerage charges.
BTST Trading Strategy
The following are some of the effective BTST trading formulas and strategies that will assist you in making prudent decisions while placing buy and sell orders.
- Circuit Limit: The share on which you want to apply the BTST strategy, put a circuit limit or trading limit of 20% on it. More importantly, if you are predicting that a particular stock is going to open at the upper circuit, you can definitely plan a position at 3:15 pm.
- Trade in well-known shares: If you are planning to apply the BTST in trading, then remember that it should be a well-known share of which other people are aware.
- Entry and Exit Points: The share in which you are doing BTST trade, your entry point should be between 3:15 pm to 3:30 pm. You should purchase BTST stocks gradually in parts and execute your order in between these 15 minutes.
On the other hand, the exit point of these shares should be between 9:15 am to 9:30 am, the very next day. The stop point of BTST trading strategy is strictly the very first 15 minutes of the next day and you should exit your position strictly between these 15 minutes.
Traders use candlestick charts to make sense of regular patterns that forecast short-term price fluctuations in BTST stocks. Four points are indicated on these charts: opening, closing, high, and low. There are two kinds of patterns: bullish, representing an upward trend, and bearish, representing a downward trend.
- Good time for BTST trading: Usually BTST in stock market is a better option when the market is opening a gap up or gap down regularly and with it, the market is moving in a range.
Trade in Liquid stocks: Liquid stocks are those which can be easily brought and sold in the market without having much impact on their price. Liquidity is therefore a measure of how easily you can trade a stock.
A stock is considered to be liquid if the difference between its bid price and ask price is narrow and its volume trade is high. Another measure of a stock’s liquidity is its high volume during a high float. High float is a condition when a high number of shares are available of a particular stock.
These are some of the technicals of the stock market that you could apply to Buy Today Sell Tomorrow and learning more about the technical analysis of stock could result in profit from every market phase. StockDaddy provides various technical analysis courses which is an important stock market skill in analyzing the market.
You have various options and strategies to trade in the stock market but if you are a government employee, then you cannot do BTST trading as there are certain restrictions put forth on you. Get to know Can government employees invest in share market. If Yes, then under what conditions?
Though trading is considered to be a risky proposition and it can be so but by learning proper stock market skills and technicals of the stock market you can minimize your risk, at the same time earn profits from market volatility and Buy Today Sell Tomorrow could be a good strategy to start your trading journey with. While there are various different types of trading in the stock market which you can know about and learn to make a profit from the market.
Que 1. Is BTST profitable?
Ans. BTST is a good trading strategy for those who want to adopt a safer approach to trading than Intraday trading, as in BTST, they can make use of short-term market volatility and book profits.
If you buy a share today and it will be delivered to your account by the day after tomorrow and in between, if the price of the share goes up and you want to make a profit from the change in price, then you sell it tomorrow even before you get the delivery of shares in your Demat account. So, yes, BTST is profitable if you make use of the change in price.
Que 2. Which is the best BTST trading platform?
Ans. There are various brokerage platforms that provide btst services and charge differently. You have to analyze different brokerage platforms and choose the platform that is best suited for you and the brand in which you have confidence.