Learn-Positional trade, BTST, STBT with stockdaddy
Positional trade, BTST, and STBT are three significant concepts in the stock market industry.First of all, let’s discuss what Positional trade is with the help of this write-up.
There is an important term in stock market trading which is positional trading. Positional trading may be worth it for you if you really want to trade in the stock market because it is a long-term trading strategy in the stock market. It is a basic trading strategy which is completely a vice-versa of intraday trading that assists you to hold your positions in the stock market for a longer period. In this, there is an advantage for you, you don’t have to be a full-time trader or spend the entire day looking at the screen like an intraday trader. Positional trading entails using technical and fundamental analysis to assess possible fluctuating market price tendencies. Few positional trading strategies help investors to grow with more benefits.
Now, you must be thinking about what are its benefits. So let’s discuss why you need to imply this trading method.
The key benefit of positional trading is that it assists you to use a variety of trading techniques. One of the significant advantages of positional trading is it makes a wonderful alternative to intraday trading, you may perform all of the tasks without spending the entire trading session riveted to the screen. It takes very little time and effort if you have a better understanding of trading strategy based on the well-researched study.
After knowing about what positional trading is, let’s dive into BTST and STBT.
BTST stands for “Buy Today Sell Tomorrow” and STBT stands for “Sell Today Buy Tomorrow” both are playing an important role in stock marketing.
What is BTST?
“Buy Today Sell Tomorrow” makes the definition more clear to you what exactly it is. Basically, it is a short-term trading method in which a trader or an investor buys some share today, either in cash or on the f&o market, and sells it the next day. Rather than taking a long position and keeping it for a while, the trader sells the stock the next day after buying it. A BTST position is taken on stocks that are projected to trade at a higher price tomorrow as compared to the price they are trading today.
How can you differentiate between BTST and Intraday?
The acquisition of stock in BTST calls is based on either a fundamental or technical analysis or the investor's belief. Furthermore, the term BTST should not be used interchangeably with the term intraday trading. Buying and selling stocks on the same day is known as intraday trading. On the other hand, BTST is referred to as buying the stock today and selling it tomorrow.
Let’s get understand deeply with the help of an example:
Suppose Ms Pratibha purchased 200 Shares of TCS on Thursday for Rs 2496.00 per share at 3:18 pm and sold the same on Friday for Rs 2533.70 per share at 9:35 am, as the market opened gap up! Ms Pratibha has earned a profit of Rs 37.70 per share and a total profit of Rs 7540/-, excluding brokerage.
Likewise, STBT is the vice-versa of BTST. In this, securities are to be prioritised and sold first and purchased the very next day.
What is STBT?
STBT is defined as selling the stock today and buying it back tomorrow. In this, only F&O stocks can be taken because short selling is prohibited in the stock market’s equity section. The short position can be covered. Therefore, a trader can only sell f&o stock in STBT. In the event of a short equity segment, this isn’t possible. STBT positions are taken in financial and operational stocks that are predicted to trade at a lower price tomorrow as compared to the price they are trading today.
Traders have the ability to sell any stock stored on their Demat account. It is important to keep in mind that short-selling positions in the equity segment must be covered only on an intraday basis. Otherwise, the trader will have to suffer and face the loss of the short sell shares being auctioned. As a result, it is prudent to stay safe and remember that short selling in the cash segment can lead to heavy loss.
Let’s get understand deeply with the help of an example:
Suppose Ms Isha sold one lot [1500 one lot size] future contract of a big bucks company on Thursday at 760 at 3:15 pm and purchased the same on Thursday at cost of 750 at 9:35 am, as a market gap down! Ms Isha has earned a profit of Rs [10 x 1500] = 15,000 excluding brokerage.
What is the strategy to trade in BTST and STBT?
BTST and STBT should trade when the stock breaks out in either direction during market hours.
Buy Today and Sell Tomorrow, buying if a stock closes at the day’s high with a huge rise in volume.
Similarly, Sell Today and Buy Tomorrow, selling first of a stock that closes at the day’s low with an enormous increase in volumes.
What challenges can be faced?
The stock market is one of the dangerous places where the trader must bump into caution while taking any BTST or STBT position. Any erroneous interpretation of price movement can lead to a trader's demise. Markets sometimes go against your expectations, leaving you with little choice but to register a loss. As a result, overnight BTST and STBT positions can catch traders off guard by displaying an opposing move.
Wrap-Up!!
To diversify risk, a good trader can use several time frames and risk-to-reward approaches. One such method is BTST & STBT. Gap up and Gap down, statistically, provide better returns while also posing a significant risk. BTST and STBT are high-risk, high-reward strategies.
