Top 5 BTST Trading Strategies

BTST trading is a popular practice while investing in the stock market. BTST stands for “Buy Today Sell Tomorrow.” As the name suggests, BTST is used as a short-term trading opportunity wherein a trader purchases shares either in cash or in the futures and options segment and sells them the next day. The trader opts to exit the stock within a day instead of holding them for extended gains or holding the shares for a longer period. BTST trading strategies are used for stocks which are expected to open in the green the next day compared to its prevailing trading price.

BTST trading should not be confused with intraday trading as BTST Strategy involves buying stocks today and selling them tomorrow, whereas in intraday trading, shares are bought and sold the same day.

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BTST Trading Strategies

The primary criteria to pick stocks for BTST is to identify when a price break out is expected to happen in the upward direction. For instance, at 3 PM, a stock is trading at Rs.100 per share and its price surges to Rs. 110 at 3:15 PM, it indicates a breakout in the price moving pattern. In such an event, the BTST position is considered appropriate as the trader can buy the stock today and sell it tomorrow at a higher price when the stock opens at a higher price the next day.

BTST Trading Strategies

Below are some proven BTST trading strategies as well as tips & tricks which would help you for stock selection and risk management:

1. Have a Stop Loss in place

While the BTST strategy can offer attractive returns, traders need to ensure caution at the time of deploying the BTST strategy. It is advised to have a stop loss in place, i.e. in case the price of your stock fall the next day; you should set a limit at which you will sell the share to avoid further losses.

2. Investing before a Major Event

One of the best times to deploy the BTST strategy is right before an expected event which can cause volatility in stock markets. Events such as company results day, RBI Policy declaration, election results, the major announcement made by the company etc. can cause shares of the company to rise in the short-term, making it apt for the BTST strategy.

3. Using the 15-minute Candle Day Analysis

Traders can utilize the 15-min candle day analysis to determine the best time to deploy the BTST strategy. A trader needs to mark the high and low on the first 15-minute candle body, wherein the top line is the resistance, and the bottom line is considered as the support. Generally, traders start watching their stock right from 9:30 AM. If the stock price crosses above the resistance line and the volume weighted average price, it indicates the right time to buy a stock, and when the stock price crosses below the support line and the volume weighted average price, it suggests it is time to sell a stock.

The 15-min candle day analysis can be best used between 3 PM to 3:30 PM, as the market usually buzzes around 2 PM. Between 3 PM to 3:30, the greedy traders and the amateurs can likely square up their trades. This half an hour window should help traders decide whether to square off their positions intraday, or their position is good enough for the BTST.

Here, the trader needs to mark the high and the low between 1 PM and 3 PM. During the last half an hour of trading, if the price of the stock remains above the volume weighted average price and closes the resistance line, then the trader should carry forward with their BTST strategy.

4. Trade in selected highly liquid stocks

The BTST strategy involves careful tracking stock prices. Hence it is advisable for traders to limit trading in 2-3 stocks at a single time as it enables the trader to track stock prices much better. Also, as the trader needs to square off their position the next day, it is recommended to use highly liquid stocks such as large-cap stocks, index-based stocks etc. which are traded in large volumes daily.

5. Book Profits when Targets are achieved

Greed and fear are the biggest enemies of stock market traders and investors. Before traders enter the market, they should set an entry price and a target level. Traders should book their profits once they achieve their target price and not allow greed to take over, as there can be a reversal of the gains in prices and the trader can lose all their profits. Small gains are better than no gains, and if a trader feels that there is a possibility of more upside, in that case, the trader should monitor the stock closely and reset the stop loss. It’s advisable to use trailing stop loss once you enter the profit zone.

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Conclusion

Trading in stocks is an art which requires knowledge and skills. While traders might prefer settling for short-term gains rather than holding for long-term profits, the BTST trading can be a potent strategy to make money trading in stocks. While the BTST trading can be highly profitable, it should be understood that even the best investors and stock market analyst cannot always predict the stock market. While all these BTST trading strategies can be used to make substantial gains, they cannot guarantee the accurate movement of the stock market the next day.

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