By Ranga Buy today, sell tomorrow, also known as BTST trading, is a strategy used for stock market trading. This trading relies on a simple rule: purchase shares today and sell them tomorrow, usually for a profit. This strategy works on the concept of overnight price fluctuations in stocks. Investors willing to hold their stocks for more than a single day but do not have the needed funds for the same, can implement the BTST strategy.
The strategy lets traders monitor shares via an intraday screener and then purchase shares today and sell them tomorrow without reflecting the shares in their demat account. Through this, traders get the benefit of the prices of the stocks in the short term.
BTST Trading: Meaning
Buy today, sell tomorrow is the kind of settlement process that allows traders not to take delivery of the shares they bought for a single day. This allows traders to utilise the short-term fluctuations in the stock market investing. Additionally, just like equity trades, buy today, sell tomorrow traders should also maintain appropriate funds in their account in order to cover the value of the shares while trading. Usually, brokers provide a list of stocks that are eligible for BTST, trading on the particular day. Traders can then select the eligible shares and place the order for them. Stocks purchased like this come under a BTST trade, meaning they can only be sold on the next day.
Executing A BTST Trade
For BTST trading, you must have access to an online trading account and a demat account. The process to execute your BTST trade includes:
- Select a stock that you think will appreciate by the upcoming trading day.
- Place your purchase order for the chosen stock during the standard market hours.
- Analyse overnight changes such as earnings reports or market sentiment, which might impact the price of the stock.
- When the stocks open with a higher value the next day, make sure to sell them before they get credited to your DMA account to gain profits.
Make sure to sell the stock before delivery so that you can avoid any additional charges and normal delivery settlement.
BTST Trading: Key Highlights
Certain pointers that you must keep in mind before implementing the BTST trading strategy are as follows:
- Stop-loss for minimum risk
Just like other trading strategies, this strategy is also accompanied by certain risk. Therefore, you can avoid losing a huge amount of money by putting a stop loss order to reduce the risk. The stop-loss order exits the market automatically when a specific loss level occurs, thereby reducing losses to the amount chosen by the trade.
- Candlestick chart pattern analysis
This includes identifying and analysing price breakouts in the chart patterns of candlestick market trends. Under this, traders seek price movements that move ahead of the previous resistance levels, representing potential trend, continuation, or trend reversal. Traders take advantage of this by placing orders for a BTST trade and selling their shares early in the upcoming trading session before the stock touches resistance levels, which eventually results in a price correction.
- Invest in liquid stocks
Liquid stocks are those with high trading volumes, meaning they come with a substantial market demand. Hence, when traders purchase these shares, they come with a better chance of selling them off in the next trading session, thereby enjoying the benefit from the price appreciation within the stock.
Conclusion:
The BTST trading strategy functions on the concept of overnight price fluctuations in the stock market. While it comes with the potential of quick earnings through profits and implements the settlement cycle to the advantage of the trader, it does not come without any challenges or risk. Traders must consider brokerage, liquidity, market volatility, and regulatory factors before implementing the BTST trading strategy.