BTST Trading


BTST stands for Buy Today, Sell Tomorrow. It is a form of short-term trading in which traders profit from short-term price swings in stocks. Unlike intraday trading, when shares are purchased and sold on the same day, shares in BTST are sold the following day in either cash or futures and options.

When you buy a share in the stock market, it takes two trading days (T+2) to reflect it in your demat account. But opportunities wait for none. What if the stock moves above your buying price the very next day, and you want to sell it right then? 

If your broker offers BTST trading, you can do it even if the delivery of the stock hasn’t happened in your demat account. Alice Blue allows you to do BTST Trading Swiftly. 

You get two trading days to execute the BTST trade after the buy order. BTST trade lies between the intraday and cash market trades. In intraday trade, if you have bought a stock today at 10 am, you have to square off the position the same day before the market closes. 

If your technical analysis indicates the prices may move further the next day, you would want to hold it. But in delivery-based cash trade, you can sell shares only after it has been delivered to your demat account. 

Know more about the technical analysis here! 

This process takes two trading sessions. A lot can happen in two days. It is to avoid delay of cash segment and same-day settlement of intraday trade that the BTST trade has come into the picture. 


BTST Strategies

Apart from tracking stock-specific and broader news events, you should be well-versed in technical analysis to make money in BTST trades. It involves spotting the big price moves on trading charts. Besides, you must apply some trading strategies to avoid losses and keep a check on greed. Read on: 

Price Breakouts in Candle-stick Charts

Run the 15-minute candlestick chart of the stock you have bought for the BTST purpose. This chart showcases the buying and selling trend based on opening, high, low, and closing prices. You may track the stock since the morning, but the real action typically happens in the last leg of the trade after 2 pm. 

This is when intraday traders settle their trades. If the stock price moves above its resistance level on the chart between 3 pm and 3.30 pm, it indicates the uptrend may go on to the next trade. This suggests you may hold it for the next session. If the price goes below its support level, it’s time to sell the stock in intraday trade itself. 

Invest before a Major Event

BTST trades give you the best returns when you plan it around a major news event. This could either be stock-specific news such as corporate earnings, bagging a new project or a deal, merger & acquisitions, and buyback and dividend announcements, or political and economic events such as RBI policy, GDP data, and election results. Deploying a BTST strategy right before a major event may bring attractive short-term opportunities. 

Select Liquid Stocks 

BTST trading should be done in highly-liquid stocks so that when you sell it, you find enough buyers instead of getting stuck in the position. Large-cap stocks and the ones part of the index are where you should hunt for BTST trades. 

Note that stocks in the Trade to Trade group, GSM (Graded surveillance measures), or ASM (Additional surveillance measures) are not allowed for BTST trades.

Know more about the liquidity of stocks. 

Put Stop loss and Target Prices

As you decide on your BTST position, before executing the trade, you must put stop loss. This is the price point at which the sell order will get executed automatically. Stop Loss caps your losses. 

For example, you expect a stock to rise, but it instead takes the opposite direction. To avoid your losses, you must have a price point (on the downside) beyond which you cannot bear the losses. This is your stop loss. 

Similarly, you must fix a target price on the upside. The stock market is volatile. In seconds, there could be a trend reversal. Target price helps you keep greed at bay. If the stock has soared to your desired levels the next morning, you must book profits instead of waiting to fetch more returns during the day. 

Know about Stop Loss Order here! 

BTST Advantages

  • If intraday trading doesn’t suit your risk appetite, BTST gives you two more days to ride the price momentum. 
  • You save on demat debit transactions since the delivery of the trade hasn’t happened. 

BTST Disadvantages

  • It’s a dynamic world. What if the stock market takes a knee-jerk reaction to an unexpected event occurring after closing hours? Your losses are certain in that case. 
  • BTST trades happen in the cash segment; hence brokers do not offer margin money, unlike intraday trades. 
  • From September 2020 onwards, market regulator SEBI has made it mandatory to deposit a 40 percent margin (20 percent each on the buy and the sell side) to execute a BTST trade. Blocked funds may make you miss out on a better trade opportunity 
  • Short delivery – If the original seller fails to deliver you all shares after T+2, he will be penalized while the exchange conducts an auction to deliver you the shares. Since delivery will get delayed, you will also fail to deliver the shares to the buyer of your sold shares. You will have to pay the penalty too. 

We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:

What is Intraday Trading
How to Select Stocks for Intraday
Best Intraday Trading Strategies
How to do Intraday Trading for Beginners
Best Indicator for Intraday
Mutual Funds vs Stocks
What is a Sub Broker?

Quick Summary

  • BTST trades are those in which traders buy today and sell tomorrow to take advantage of short-term changes in the market.
  • Apart from tracking the stock-specific and broader news events, you should be well-versed in technical analysis to make money in BTST trades. Some important points to consider are mentioned below.
    • Price Breakouts in Candle-stick Charts
    • Invest before a Major Event
    • Select Liquid Stocks
    • Put Stop loss and Target Prices

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