By Vishweshwar HS, www.showmytrade.com
The Stock market is an auction market. Current Market Price (CMP) is the result of the buyer’s and seller’s agreed (matched) price. The critical factor of price movement is based on the demand and supply of the stock at any given point in time. When the market opens each day, there is no rule that the market should open at a pre-determined (particular) price. Opening demand and supply will create an opening price. The opening price of the stock can “Gap up” or “Gap down” price opportunities.
Buy Today and Sell Tomorrow (BTST) and Sell Today Buy Tomorrow (STBT) is one of the popular methods to capture the “Gap up” and “Gap down” price movement of a stock. As the name says, the shares are bought first and sold on the next day.
Example of BTST
Ms. Ahalya buys 200 shares of TCS on Wednesday at Rs 2496.00 per share at 3:18 PM and sells the same on Thursday at Rs 2533.70 per share at 9:35 AM, as the market opened the gap up! Ms. Ahalya has made a profit of Rs 37.70 per share and a total profit of Rs 7540/-, excluding brokerage.
Similarly, Sell Today Buy Tomorrow (STBT) is the opposite of BTST. Here securities are sold first and bought the very next day. But STBT is not allowed in equity shares.
Example of STBT
Ms. Veena sell one lot [1200 one lot size) future contract of Infosys on Wednesday at Rs 730 at 3:15 PM and buy the same on Thursday at Rs 720 at 9:35 AM, as a market gap down! Ms. Veena has made a profit of Rs [10 x 1200] = 12,000, excluding brokerage.
Buy Today & Sell Tomorrow, buying if a stock closing at day’s high, with a significant increase in the volumes.
For example, ITC’s day high today is Rs 310, between 3:15 PM and 3.30 PM, if the stock is very close to day’s high Rs 310, say Rs 308-309 with increased volume. We buy that stock for Rs 3-4 jump the next day between 9:30 AM or 9.45 AM.
Similarly, Sell Today & Buy Tomorrow (only in futures), selling first if a stock closing at day’s low, with a significant increase in the volumes.
For example, Biocon (in the future contract) day’s low today is Rs 290, between 3:15 PM and 3.30 PM, if the stock is very close to day’s low Rs 290, say Rs 291-292 with increased volume. We sell that stock for Rs 3-4 short side the next day between 9.30 AM or 9.45 AM.
Merits of BTST & STBT
De-Merits of BTST & STBT
A successful trader can use different time-frame and risk-to-reward methods to diversify the risk. BTST & STBT is one such method. Statistically, Gap up and Gap down gives better rewards along with high risk. BTST & STBT is a high risk, high reward method.
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What is Intraday or Day Trading?
Kindly share your comments on the BTST & STBT trade below. Any information regarding the day trading adds in the next update.
Thanks for reading! Good Earning!
