The buy today and sell tomorrow (BTST) is a trading strategy in which traders tend to take advantage of short-term volatility in stock prices.
Primarily, the BTST strategy is used by short-term traders who look forward to taking advantage of price movements that occur overnight or during the next trading session.
While being different from intraday trade, where shares are bought and sold the same day, shares in BTST are sold the next day—either in cash or futures and options (F&Os) category.
Once the stocks are bought, the stock is supposed to be delivered into the demat (dematerialised) account on the next day due to the settlement cycle. In the case of a BTST trade, the stocks are sold prior to them being delivered to the demat account.
However, before engaging in any BTST trade, it’s crucial to undertake thorough research and analysis of the stock that one intends to trade. It is important to keep an eye on potential catalysts, news events, technical patterns, or fundamental factors that are likely to have an influence on the price movement of a stock in the short term.
Also, opt for stocks that have significant liquidity, which means that they have high trading volumes. Thus, a trader can easily buy and sell the shares without having any significant impact on the price of a stock.
There are also a few risks associated with BTST trading. A potential trader should be aware of their risk tolerance and set appropriate stop-loss orders to keep a tab on likely losses. In addition, diversification of the portfolio can help to offset the impact of the performance of any individual stock.
Holding positions overnight exposes a trader to overnight risks, which include unexpected news, earnings announcements, or market developments. It is essential to remain watchful through relevant news and events that are likely to have an impact on chosen stocks during non-trading hours.
Before adopting the strategy, be mindful of brokerage fees and other transaction costs associated with BTST trading that are likely to have an influence on profits.
Being impulsive could impact the overall idea of BTST trading while having discipline and patience can go a long way.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
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