BTST Trading: Everything You Need to Know
If you are a newbie to the world of stock trading, there are chances that you have repeatedly heard of BTST trades or the buy today, sell tomorrow facility. However, most new entrants struggle to understand the meaning of BTST transactions.
BTST stocks or BTST trades allow a trader to take advantage of short-term volatility. In this type of trade, investors can buy today and sell tomorrow. In addition, they can sell the shares they have purchased even before the delivery to their Demat account. In other words, they can sell the shares before they are deposited in the Demat account.
This blog will help you understand everything about BTST in stock markets.
BTST Meaning and How Does BTST Work?
In an equity delivery order, it takes T + 2 days for the shares you buy to credit into your Demat account. T, here, refers to the day on which you trade the shares. The seller also receives the credit in his account in T + 2 days.
During this period, if the value of the shares purchased by you increases, you cannot sell the shares to book a profit since the order is normal. But, if you place a CNC or cash and carry order, you can sell the shares as soon as you see an appreciation in their value to book profits.
Features of BTST Trades
- The BTST facility allows you to sell stocks before they are credited into your Demat account. You can execute the sell order for up to two trading days after the buy order. The shares are credited to your account by the third day, after which you can create a regular sell order.
- BTST trading facility is unique and offered by a few stockbrokers in India.
- You can use the BTST facility only on scripts approved by the stockbroker. Therefore, ask your stockbroker to share the required details with you so that you only transact on approved BTST stocks.
- Many brokers do not offer BTST trading for SME companies.
- You cannot use the BTST facility for stocks in the T2T segment. It is because it is mandatory to take delivery of Trade to Trade Segment stocks.
- There are no complex steps or special order types to complete BTST trades.
Advantages of BTST Trading
A trader can enjoy some benefits with BTST trades. These are:
- With BTST transactions, one can make the most of short-term volatility in the stock market.
- In BTST trades, you sell shares even before they are deposited with the DP. As a result, you do not have to pay any DP charges.
- If you execute an intraday trade but do not expect any profit before market closing, you can convert the order into a BTST and choose to sell it the next day.
Disadvantages of BTST trading
BTST trades also carry some risks. Some of them are:
- If your account does not have a sufficient balance, you will have to pay a margin penalty on BTST trades.
- Several stockbrokers do not offer the service for BTST. Instead, they complete transactions under CNC. Consequently, you will have to pay CNC order charges, which are different from broker to broker.
- If the seller defaults to deliver the shares on the settlement date and you fail to deliver the shares for your sell order, you will have to pay the penalty. Therefore, before you indulge in BTST transactions, ask your stockbroker about the penalties for short delivery.
There are two ways in which BTST charges are calculated.
- BTST brokerage charges on the Trading Day
If you buy and sell BTST stocks on the same trading day, it is recognised as an intraday trade. Therefore, your broker will levy the charges of intraday trading.
- BTST brokerage charges on T+1 or T+2 Days
If you buy the shares on a particular trading day and sell them the next day or the day after, the broker levies equity delivery brokerage charges. However, some stockbrokers offer brokerage-free equity delivery, which means there is no need to pay any brokerage for BTST trading.
Please note a few stockbrokers in India charge different BTST brokerage fees based on your brokerage plan and when you sell the shares. So ask your stockbroker about these charges before proceeding with the purchase of BTST stocks.
BTST trading requires extensive practice and experience. You must devise a proper strategy before executing the trades to avoid any mistakes and protect yourself from incurring losses. However, most traders complete successful BTST trades regularly. They follow the practice of buying shares just before the market closes and selling them on the next day.
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Frequently Asked Questions
BTST stands for Buy Today, Sell Tomorrow in trading. The facility allows traders to sell the shares before delivery, which means they can sell them even before the shares are credited to the Demat account.
In regular trading, shares take T + 2 days to get credited to a trader’s Demat account. T refers to the day of order execution. It is not possible to sell the shares before delivery. But, the BTST trading facility allows you to sell shares on the same day or with T + 2 days. As a result, traders can earn profits from the short-term price surge in stocks.
The full form of BTST is Buy Today, Sell Tomorrow. On the other hand, STBT stands for Sell Today, Buy Tomorrow. BTST stocks are bought on T-day and sold even before they are credited to the Demat account on T + 2. In STBT trading, investors can sell the shares before buying them. The BTST facility is provided by a few reputable brokers in India. However, STBT is not provided by any broker since short selling is not allowed in the Cash Equity segment.
BTST allows you to sell the stocks on the same day or the next day. In Day Trading, you need to sell the stocks on the same day.