BTST represents Buy Today, Sell Tomorrow. BTST is one of the most common forms of short-term trading that many traders adopt in the share market. BTST allows a trader to buy shares one day and sell them the next day without the shares being delivered to your demat account.
In this blog we will share the benefits of BTST trading, the BTST pros and cons and help you understand if this short-term gain approach to trading stocks is right for you.
What is BTST Trading?
BTST means ‘Buy Today, Sell Tomorrow’. When you buy shares today and sell them tomorrow, without waiting for delivery of shares into your demat account, this is called a “BTST trade”. In India it usually takes two days (T+2) for shares to get delivered, which means you need to wait two days before you can sell the shares. With a BTST trade, you do not have to wait for the shares to be delivered.
How Does BTST Work?
Here’s a simple example:
- You buy 100 shares of a stock for ₹200 on Monday.
- On Tuesday, the price of the stock increases to ₹210.
- You sell the shares for ₹210, thereby earning a profit of ₹10 per share on the transaction.
- You can do the transaction without waiting for the shares to get credited to your demat account.
The buy-and-sell method that uses the quick time frame is called BTST trading.
Advantages of BTST Trading
Let’s look at the main benefits and advantages of BTST trading:
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Fast Profits
You don’t have to wait many days or weeks. If you pick the right stock, and the stock price goes higher the next day, you can book profits fast.
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Short-Term Profit Strategy
BTST is best for traders who want to profit based on short-term price actions – if you suspect good news or a follow-through from the market the next day.
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No Delivery Of Shares Is Required
Because you sell before the delivery of stock, you won’t have to receive the shares in your demat account.
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Low Trading Costs
Some brokers have no delivery charges for BTST trades, continuing to lower the costs of trading.
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Low Capital Blockage
You are only holding for a day, which means your capital is not blocked for an extended period. This is useful if you want to rotate your capital.
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No Risk Of Holding Overnight
If you fear the stock may fall, you’d rather sell the next day to reduce your risk.
Disadvantages and BTST Risk Factors
While BTST has many benefits, it also comes with risks and limitations. Let’s look at the BTST pros and cons, especially the downside:
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Short Delivery Risk
The risk in BTST trading. When you purchase stocks, you must complete the transaction by buying from a seller, in which case the stock buyer must deliver the stock. If the buyer fails to deliver the stock within the proper frame of time, you may have to pay auction penalties.
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Risk that the Price Drops the Next Day
Generally, prices will rise overnight and may rise the next day. However, the price can also go down; therefore, instead of making a profit, you may incur losses.
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You Have No Control on Settlement
You are relying on the exchange and broker to handle the settlement. Even a minor mistake, or delay, can impact you.
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BTST Success Rate is Low if You Do Not Do the Research
Your BTST success rate will be low if you trade based on guess work or tips. Trading (successfully) based on solid research, or trading after news has been published, will provide the best opportunities for success. you can see more info on this forex trading website.
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Brokerage or Margin Can Be Higher
Depending on the broker you use to trade, sometimes the margin or brokerage can be stated or standard and sometimes they are simply higher for BTST trades. Whatever the case, it will reduce your net profit.
Who Should Try BTST Trading?
BTST is not for everyone. Here’s a look at who can benefit from this strategy:
- Traders who track news, stock charts, and market trends
- People with short-term trading goals
- Traders who don’t want to block capital for long
- Those who have some experience in the stock market
- Traders who can check the market daily
Who Should Avoid BTST Trading?
You should avoid BTST trading if:
- You are a complete beginner
- You don’t understand market risk
- You don’t check the stock market regularly
- You prefer long-term investments
- You don’t have a clear trading plan
Tips to Succeed with BTST Trades
If you are interested in BTST trading, here are a few tips to help improve your chances of success:
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Choose Stocks with High Volume
Look for stocks that are highly liquid – these are stocks that can easily be bought and sold without greatly affecting the price.
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Avoid Trading News Stocks
Do not trade BTST in stocks that will have all news/Earnings/announcements in the near term (which can lead to large fluctuations)
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Always Set A Stop-loss
Always use a Stop-loss in case the stock actually goes down instead of up, you can use to your advantages to protect your money/stopped-lossed position from larger losses.
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Use Chart or Technical Analysis
Always check charts or technical performance of stock prior to entering trades BTST. Look for signs of upward trend in short timeframe.
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Don’t Over Lever
Some brokers offer leverage in BTST trading that allows you to use more capital than you actually have in your account, be careful here with overtrading.
BTST vs Delivery vs Intraday
| Feature | BTST | Delivery | Intraday |
| Holding Time | 1 day | Many days/weeks | Same day only |
| Risk Level | Medium | Low | High |
| Suitable For | Short-term traders | Long-term investors | Fast traders |
| Capital Needed | Low | High | Medium |
| Settlement | Before Delivery | Full Delivery | No delivery |
Conclusion
The benefits of BTST trading make it an option to consider for anyone seeking quick profits, particularly for part-time traders or for traders willing and able to continually check in on the market.
However, BTST also has its risks. It is important, where applicable, that your understanding of BTST includes BTST risk factors including short delivery risk and price depreciation risk. When used wisely and with the right stock, BTST can potentially offer an additional short-term gain trading strategy.
If you are a new trader, BTST could be a cheap way to test the waters by using a small amount of money to give you first hand trading experience. Keep track of the trades that you make and review any performance results. You can improve your BTST success rate with experience and patience.
