BTST (Buy Today, Sell Tomorrow) Trading Strategy– Meaning, Advantages & Shortcomings

Trading is important as it helps people grow their wealth. It also keeps the market running smoothly by helping set prices. If you are already into trading, then you must know that there are many types of trading strategies such as intraday trading (where you buy and sell in one day), swing trading (holding stocks for a few days), and long-term investing (holding stocks for a long time).

Apart from these popular strategies, there is another strategy traders often use, and it is BTST (Buy Today, Sell Tomorrow). With this, you sell shares the next day after buying them.

Let’s understand what is BTST trading, how it works, its benefits, risks, how it differs from intraday trading, and more. You would also learn about the risks involved and how to execute BTST trades smoothly.

What is BTST Trading?

BTST (Buy Today, Sell Tomorrow), as the name suggests, is a form of trading where you buy shares today and sell them tomorrow without waiting the shares to arrive in your Demat account. Usually, when you buy shares, they are credited to your account after two working days. But in BTST, you will not wait for this as you can sell the shares the very next day.

How to Execute a BTST Trade

Here’s how you can execute a BTST trade:

Step 1: Select a Stock: Choose a stock that you believe would increase in price the next day.

Step 2: Buy the Stock: Place a buy order for the selected stock.

Step 3: Keep an Eye on the Market: Monitor any overnight news about the company and see how the stock performs early the next day.

Step 4: Sell the Stock: If the price has gone up, sell the stock the next trading day to book your profit.

Note: Make sure to sell the stock promptly as the price might drop as well.

Also Learn: Open High Open Low (OHOL) Trading Strategy: Definition, Examples, and Mechanics

Basic BTST Strategies You Must Know

BTST would work best for you if you follow these simple strategies:

1. News-Based Strategy: Stocks can rise or fall based on news such as company earnings, new projects, or market announcements. If you hear positive news before the market closes, make sure you buy the stock and sell it the next day when the price rises.
2. Technical Analysis: You can also use charts and indicators like RSI (Relative Strength Index) or moving averages to predict if a stock’s price would rise. If you see a bullish pattern, then you can certainly go with BTST trading.
3. Volume-Based Strategy: If a stock has high trading volume, then it means investors are interested in the stock, and this would often lead to price increases. So, check for stocks with high volumes.
4. Gap-Up/Gap-Down Strategy: If a stock opens at a much higher or lower price than the previous day’s close, traders can make quick profits by buying or selling using the gap as an opportunity.

BTST vs. Intraday Trading

People often confuse BTST trading with intraday trading. So, read on to understand the differences between them:

• Holding Period: In BTST, you hold the stock overnight and sell it the next day. In intraday trading, you must buy and sell within the same day before the market closes.
• Settlement: In BTST, you can sell shares before they are credited to your Demat account. In intraday, no shares are actually delivered, as the trade is completed within the same day.
• Risk: BTST carries overnight risk as stock prices may change by the time the market reopens. Intraday avoids this as trades are settled in the same day.

Advantages of BTST Trading

• Quick Profits: Traders can quickly make money by buying shares today and selling them tomorrow if the price increases.
• No Full Payment Needed: You do not need to wait for shares to be credited to your account and hence, you don’t have to pay the full amount upfront.
• Avoid Auction Penalty: If you sell shares that are not credited yet, BTST allows you to avoid penalties you might face with short-selling.
• Take Advantage of News: If positive news comes in after the market closes, you can take advantage of the stock price rise the next day.

Shortcomings of BTST Trading

Here are some disadvantages of BTST trading:

• In BTST, stock prices can change overnight due to global or domestic news.
• There is no guarantee that the stock price would go up the next day. If it falls, you may face losses.
• You can only trade during regular market hours, so if major news breaks after hours, you cannot react instantly.
• If there are not enough buyers for your stock the next day, it can be difficult to sell at a good price.

Risks Associated with BTST

Be it any form of trading, risks are always there. With BTST, here are the major risks involved:

• Stock prices can be volatile and may change drastically overnight, and this could lead to unexpected losses.
• Sometimes, the shares you purchase may not get delivered on time due to technical issues.
• Global factors such as economic changes or international news may have a big impact on stock prices.

Common Mistakes to Avoid in BTST Trading

If you wish to be successful in BTST trading, then you must avoid the following mistakes:

• Overtrading
• Ignoring market trends
• Emotional trading

Conclusion

BTST trading can help you make quick profits by buying today and selling tomorrow, taking advantage of short-term price changes. Now that we have covered what BTST trading is, its benefits, risks, and how it compares to intraday trading, how about trying this strategy with an easy trading platform?

If you are looking for a simple way to trade, then you must download the Tradejini Cubeplus app. The app offers low fees, easy-to-use tools, and real-time data to help you trade the best way you can.

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