BTST Trading and its strategies

"Buy Today Sell Tomorrow" makes it clearer what exactly it is. BTST means to buy a share today and sell it the next day, whether in cash or on the F&O market. When the trader buys a stock the next day, he/she sells it the next day instead of keeping it for a long time. As the name suggests, BTST positions are taken on stocks that are expected to trade at a higher price tomorrow as compared to today’s price.

Let us make you understand this with the help of an example -

The balance of your trading account is 10,000 rupees. On Monday, you bought 5 shares of TCS for Rs. 2000, and on Tuesday you sold those 5 shares for Rs. 2100 each.

Your Buy Value = Rs. 10,000/-

Your selling value = Rs. 10,500/-

On Monday, your account will be blocked for the purchase of TCS shares with Rs. 10,000 in your account. This is settled to the Exchange on Wednesday (T+2 day).

Shares due to be delivered on Thursday are sold on Tuesday. You can sell the shares on the trading terminal as the delivery of TCS shares is expected on Wednesday

As soon as your stockbroker receives the shares on Wednesday, he marks the shares toward your upcoming obligation to give them, and the sale is complete on Thursday.

Although the funds from selling your stock are credited after 2 days (Friday in the above scenario), you can purchase new stocks with 80% of the proceeds on the day of sale. On T+1 (Thursday, in the above scenario), the remaining 20% will be available for the purchase of new stocks.

Points to be remembered before performing BTST-

1. A breakout in the price movement of the security on the day of purchase indicates the product will be sold in the following days. This is followed by the T+1 settlement cycle.
2. Purchasing stocks before a major event expecting short-term volatility in price.
3. High-liquidity securities should be traded.
4. Profit booking at 1 point less than the original target price.

Pros of BTST Trading

1. If the market is not playing well, the securities are available for a longer period of time.
2. Traders can choose fundamentally strong stocks for btst trading to minimize their loss risk.
3. If traders hold securities for more than T+1 days, they become eligible for dividends and other benefits.

Cons of BTST Trading

1. A number of stock brokers do not provide margin facilities for traders, so they are required to pay the entire amount.
2. It is possible that the traders will be charged extra brokerage charges during the next day's selling in BTST.

My name is Anubhav and i write articles on multiple topics. Thanks for showing support.