What is BTST Trading

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BTST meaning is ‘Buy Today and Sell Tomorrow'. This trading strategy involves buying shares on a specific date and selling them the next day to take advantage of the price volatility. As online share trading has grown, individuals can buy and sell securities conveniently and efficiently. Also, BTST in trading has become a popular approach for traders looking to capitalise on short-term market volatility.

In this article, we will explore What is BTST trading in detail and BTST meaning with examples. We will also discuss its advantages and disadvantages for traders. 

Understand What is BTST Trading with Example

BTST means Buy Today, Sell Tomorrow. So, BTST trading is the act of buying an asset today and selling it the next day. which is also sometimes called ATST- Acquire Today, Sell Tomorrow.

In intraday trading, you buy some shares today and sell them today. When you buy shares today and sell them after receiving the delivery in your Demat account, it is called a delivery order, also known as a CNC (Cash and Carry). BTST trades are somewhere between intraday trading and delivery orders. BTST trading means the process of purchasing shares today and selling them before the shares are delivered to the demat account. 

Let’s understand the BTST trading example: On Tuesday, I bought shares, and on Wednesday, the prices went up. My only option is to sell those shares on Wednesday, but how will I do that if I don't own them yet? This is where BTST is useful. It allows you to sell your shares even before they are deposited in your Demat account.  

 

How Does BTST Trading Work?

Now that you know the BTST meaning, let's see how it works. BTST trading allows traders to sell shares they have bought before being delivered to their Demat account or credited to their Demat account. The shares you buy are usually deposited with your Depository Participant on settlement day, which is T+2 days after you buy them. However, if you want to sell them before settlement, you can do a BTST trade. 

Say you buy 10 HDFC Bank shares on Monday for Rs.1,500 per share, making your total purchase Rs.15,000 you notice the shares are trading at 1,600 on Tuesday and decide to sell them. For the 10 shares, the selling price would be Rs.16,000. The settlement date for your buy order is Wednesday, and for the sell order, it is Thursday.

In BTST trading, you get the shares on Wednesday, which you have to deliver on Thursday, adhering to the T+2 settlement process. Once you get the shares on Wednesday, your stockbroker marks them as an upcoming obligation that needs to be settled on Thursday. In this way, the BTST trade gets executed.

Features Of The BTST Trade

The BTST trade has these features.

  1. With BTST, you can sell shares that you haven't received in your Demat account yet. This option lasts until you get your shares, so two trading days after delivery. 
  2. BTST isn't allowed in the Trade to Trade segment (T2T) since stocks are so speculative. Putting in a CNC order is mandatory.
  3. Brokers don't offer the BTST facility to SME companies.

Advantages Of BTST Trading

You can trade BTST for a lot of reasons. Let's look at a few. 

  • With BTST trading, you can take advantage of the stock market's short-term volatility. 
  • The DP doesn't charge BTST trades since shares aren't deposited with them and sold before that. 
  • If you think your intraday trade won't be profitable, you can convert it to BTST and sell it the next day.

Disadvantages Of BTST Trading

There are some downsides to BTST trading. They're here.

  • When shares don't arrive on the settlement date and you don't deliver them for your sell order, a penalty applies. Hence, it's important to ask your stockbroker about short delivery penalties. 
  • Margin penalties may apply if you don't keep enough balance in your account. 
  • Most stockbrokers don't offer BTST, so transactions are handled through CNC instead. Brokers charge different prices for CNC orders, so you may need to pay for those. 

Conclusion 
BTST trading has gained popularity as a strategy that allows traders to capitalise on short-term market volatility. By buying shares today and selling them tomorrow, investors can potentially benefit from price fluctuations. So, understanding what BTST means gives you a new approach to profit from your trading activities. This approach provides flexibility, enabling traders to sell shares before they are delivered to their Demat accounts. Moreover, with the online trading app, traders can conveniently access their Demat accounts. With the platform's easy-to-use interface and convenient execution speed, trading is hassle-free.

FAQs on What is BTST Trading

In intraday trading, you must sell the assets on the same day. So, it is risky. In BTST trading, you get two days' time. So, BTST is safer than intraday trading. The cost of Demat debt transactions is also lower as the delivery of assets hasn’t occurred. However, you can trade with any of the two strategies based on your trading objective and risk appetite.

It's best to buy BTST stocks 30 minutes to an hour before the market closes.

BTST allows you to sell shares either today or tomorrow. Intraday trading requires selling the shares on the same day of order execution or converting the trade into a delivery trade.

You can take advantage of short-term volatility with BTST stocks. Investing in this type of trade allows you to buy today and sell tomorrow. Plus, you can sell the shares before they get into the Demat account.

Choose stocks for BTST trades based on these things: A stock with prices that move above the resistance level on the candlestick chart, Stocks with a large cap or moderate to high liquidity, Don't make trading decisions based on irrational market behaviour.

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