What is BTST Trade?
BTST full form is “Buy Today Sell Tomorrow” whereas BTST meaning is that you have to buy shares and compulsorily sell them tomorrow. BTST trading means a strategy by which traders take advantage of short-term market volatility in their favor by buying shares today and selling them tomorrow.
Features and Important terms of BTST Trading
1). Settlement Cycle: A settlement cycle in BTST trading strategy is the time period taken for the completion of a trade deal which means that upon the completion of the settlement cycle, the buyer of the securities will get the delivery of shares and the seller will receive the funds.
A different settlement cycle is followed for both equities and Futures and Options. There are mainly two types of settlement cycles in the stock market:
2). T+1 trade cycle - T+1 settlement cycle is used in the case of Equities. Here T is the Trade date at which the buy or sell order is placed and T+1 are the days taken to complete the trade deal.
For example, if the buyer places a buy order on Monday, then the shares will be credited to his account by Tuesday and seller will receive the funds on Tuesday as well.
3). T+2 trade cycle - In this settlement cycle, when the buy order is placed on T day which is Monday, then the money will be debited from your Demat account immediately but the shares will be reflected in the Demat account of the buyer on Wednesday.
Note: The settlement cycle only counts business days and excludes Saturdays and Sundays and other National holidays. While the transfer of ownership of shares takes place, the shares of registered companies are stored in the depository. Know about what is depository system in detail.
4). Cash and Carry: It is also called basis trading, where the basis is the difference between the spot price of an asset and its futures price. Essentially, the goal of the strategy is to manipulate the price difference in order to make a profit.
For example, In normal trading, once you place a buy order and there is an appreciation in the value of shares on the same day, you cannot sell the shares as you can only do that only once you receive those shares in your Demat account after T+2 days.
Know the btst trading strategy in detail