What is BTST Trading - Advantages & Shortcomings What is BTST Trading - Advantages & Shortcomings

What is BTST Trading – Meaning, Advantages & Shortcomings

Countless strategies are available to traders and investors to try and profit from online stock trading. Many of these are well documented in print and social media. Some stock market participants rely on their own skill sets and self-propagated game plan to stay ahead of the market. BTST trading is one such strategy that has proved beneficial to many.

What is BTST Trading?

BTST Trade, in stock market terms, stands for ‘Buy Today and Sell Tomorrow‘. Indian stock exchanges follow the T + 2 settlement period. However, you must note that domestic stock exchanges are already in the process of shifting over to the T + 1 trading cycle in a phased manner.

The T + 2 settlement cycle necessitates that stocks bought on a particular day will get credited to your Demat account in +2 working days. So if you have invested in new security on Tuesday, it will get delivered to your account on Thursday. However, it is possible to sell the stock even before it has been credited to your online Demat account.

📈 What type of traders use BTST trading strategy?

BTST is a plan used by traders who spot an opportunity of a stock price appreciating over just one day. So, if investors have identified a trade to buy particular security on, let’s say, Monday and intend to sell it the very next day, they can make use of the BTST strategy.

What are the advantages of BTST trading?

  1. It allows you to profit from short-term volatility.
  2. Transaction charges are less than usual buy-sell trades.
  3. Many brokers allow you to use nearly 80% of the sale proceeds to trade further on the day of the sale itself.
  4. Compared to intra-day trading, it gives you one extra day to gain from the market.

What are the shortcomings of BTST trading?

  1. Margins are not available on BTST trades, and hence traders need to put up the entire capital required to buy the stock.
  2. In some exceptional cases, BTST could lead to penalties for you. The trouble arises if the shares bought by you do not get credited in your Demat account on the scheduled T + 2 cycle date for any particular reason. Then you would be unable to deliver the same on the next day, which it can lead to severe penalties for the trade.
  3. Not all brokers offer BTST.
  4. BTST facility is not available for Trade 2 Trade (T2T) segment shares.

Final takeaways

We can see that BTST trading can be a profitable option if used judiciously. It merits attention that the trader needs to be aware of sudden price movements in the chosen stocks.

When an opportunity is spotted of a possible surge in the stock price in just one day, BTST can be the best bet to make profitable use of the situation. BTST is used by investors when they expect a price breakout to happen in the upward direction of the security on the next day of purchase.

Before you take your first step towards BTST trading here are different types of stock trading charges that you must know.

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Happy Trading 📈

Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.

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