Buy Today Sell Tomorrow (BTST) is a type of trading that offers stock traders a different kind of advantage that the general T+2 trading cycle cannot. BTST trading allows traders to sell their shares even before the settlement day if necessary. BTST not only helps in the optimisation of liquidity but also plays a significant role in reducing probable loss from any share that one owns, making it a profitable trading method.
Stocks to Buy Today & Sell Tomorrow: 6-Dec-2023
5paisa analysts bring the best intraday ideas, short-term ideas and long-term ideas for you. In the morning we provide best momentum stocks to buy today, while in the last trading hour we provide Buy Today Sell Tomorrow (BTST) and Sell Today Buy Tomorrow (STBT) ideas.
1. BTST: LT
● Current Market Price: ₹3368
● Stop Loss: ₹3300
● Target 1: ₹3436
● Target 2: ₹3500
2. BTST: BANKINDIA
● Current Market Price: ₹116
● Stop Loss: ₹112
● Target 1: ₹120
● Target 2: ₹123
3. BTST: GRINFRA
● Current Market Price: ₹1180
● Stop Loss: ₹1150
● Target 1: ₹1210
● Target 2: ₹1240
BTST trading is common among experienced investors. Often known as "buy today, sell tomorrow" deals, these trades are extremely short term where investors buy stocks today and sell them the next day to take advantage of a possible price rise in the stock. However, many investors remain wary of this trading technique as the risk involved is high.
What is BTST Trading?
BTST Trading is an unconventional procedure that helps traders deal with BTST shares in the stock market and take advantage of their short-term volatility. BTST in the stock market allows traders to sell out shares bought but not yet received in the traders' Demat account.
The conventional trading procedure or the T+2 process ensures that the shares are credited to the traders' Demat account after T+2 days, where T signifies the day of trading, which means that there is a time gap between the trading and the actual arrival of the shares to the trader. Due to this significant difference, many traders find BTST trading better than intraday trading.
How does BTST Trade work?
Indian financial markets operate on a T+2 settlement cycle. If you purchase a stock on Monday, it will arrive in your Demat account on Wednesday. You can, however, sell your shares before they arrive in your Demat account. Suppose you have Rs. 20,000 in your trading account. You purchased 5 L&T shares on Monday for Rs. 4000 and sold them on Tuesday for Rs. 4100 a piece.
● Rs. 20,000/- is the Buying Price
● Rs. 20,500/- is the Selling Price
The Rs. 20,000 in your account will be restricted on Monday for purchasing L&T shares. (Resolves with the exchange on Wednesday (T+2)).
You sell the shares on Tuesday that you would have ideally delivered on Thursday. You are allowed to sell the shares on the trading platform because the delivery of L&T shares is on Wednesday, per plan. The stockbroker receives these shares on Wednesday, deducts them from your upcoming delivery obligation, and finalizes the deal on Thursday. You are still permitted to use 80% of the sale proceeds to buy new stocks on the day of the sale, even though you do not receive the credit for the money made from selling your stock for another two days (in this example, Friday). On T+1, the remaining 20% becomes accessible for purchasing additional stocks (in this case, Thursday).
Is there a risk to executing BTST trades?
Several traders are apprehensive of short-term trading since it may involve risk. The desire to make a quick profit is always present, but whether this is possible, given how volatile markets can be, remains to be seen. There is a remote possibility that the investor from whom you acquired the shares may fail to deliver the stock to you by the end of market hours the following day. You do not influence this; nobody can predict how transactions will proceed due to certain delays.
If this happens to you, be aware that the penalty for late delivery is not fixed and is calculated individually. In such a case, keep in mind that price movement and liquidity determine the short delivery penalty. You will be required to pay the difference in price between when you sold your shares and when the exchange acquired them at the auction. If you're lucky, the cost will be only 1 or 2 per cent, but it could be as high as 20%.
What are the advantages of BTST trading?
BTST buy-sell trading has many benefits:
● BTST buy-sell increase your profit when you anticipate a rise in the stock price.
● Before the Demat account settlement, you have two days to finalise the agreement.
● You won't be charged for Demat transaction fees because it doesn't include Demat delivery.
● BTST buy-sell Transaction fees are lower than for typical buy-sell trades.
● Many brokers may use almost 80% of the selling profits to make additional trades on the very day of the sale.
● In BTST buy-sell trading, you have an extra day to profit from the market compared to intraday trading.
BTST stock market trading may be profitable if done correctly. It is important to note that the trader must be alert to any unexpected price changes in the equities they have picked. BTST may be the best option to capitalise on a potential increase in the stock price in only one day if the chance arises. Investors employ BTST when they anticipate a price breakout in favour of the investment on the next trading day.
Stock trading in itself is like a game of chess where traders speculate and bid on their moves very efficiently. One of the many kinds of stock trading that are out in the market, the one that attracts the attention of many traders, is BTST Trading. It is not only popular for its profit-earning abilities but also for other benefits like not getting charged for the Demat account.
Just how BTST trading has its benefits and profits, it also does come with some undeniable risks. Hence, if a trader is new to the market, they should thoroughly study and analyze the stocks and their movement first and then decide whether it is a suitable time for them to start BTST trading. One can also seek help from a professional or someone experienced with stock trading.
About the Author
Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
Frequently Asked Questions
Intraday trading lets traders sell their shares on the same day it is bought, but unlike intraday, one can sell BTST stocks the next day.
Trade to trade stocks and stocks under GSM or ASM are not allowed for BTST trading.
The best time to acquire BTST stocks is half to an hour before the market closes and then selling it the next day at the earliest.
The risk with BTST buy-sell transactions is that because you are selling stock that is not yet in your Demat account, you depend on the seller from whom you purchased the shares to deliver the stock. If the seller fails to deliver the shares, i.e., your commitment to give shares breaks due to the short delivery, you will suffer an auction penalty of up to 20% of the short-delivered stock value.
Price increases toward the end of a trading session can result from the market's knee-jerk reaction and might not be sustainable in the next session. As BTST buy-sell trading occurs in the cash sector, brokers do not provide the same margin facilities to traders as they do for intraday trading. SEBI has revised the BTST regulation since 2020. Before completing a BTST deal, traders must pay a 40 per cent margin. If the seller does not deliver the stocks on schedule, the short seller may face a penalty. The shares will be auctioned off to you by the exchange. Because the entire procedure lengthens delivery time, you will be penalised if you fail to deliver products to the final customer.
The following are some tested BTST trading strategies. 1. Establish a stop-loss. 2. Invest ahead of a Major Event. 3. Use the 15-minute candle day analysis. 4. Invest in high-liquidity stocks. 5. Book profits after attaining goals.