Introduction to Square Off
Squaring off is a trading style that day trade investors use to make profit from the market volatility. The trader buys a number of stocks of one company and sells them off on the same day at a higher price usually, which gives the trader an amount of profit. Or vice versa.
Understanding Square Off
Square off is a settlement style from the investor’s perspective, where all the shares purchased by the investor are entirely sold off too, most usually to make a profit from the change in price. It is also a squared off position when the trader sells off the stocks at a price, only to buy the same number of shares back at a lesser price than before. Squaring off helps to cut down on losses or help make profits on the current position. An intraday trading refers to the session of trading of stocks and other securities on the stock exchange that traders partake in during the time the session stays open. This is carried out by knowledgeable investors who seek to make profit off of market volatility and the short-term changes. The square off transactions are mandatory in an intraday trading session, so that if the investors themselves don’t close off their holding position, the broker will do it for them. The first position (buy or sell) does not signal the broker to transfer the shares to the investor’s Demat account, but instead are held until square off, following which the profits and losses are properly booked.
Highlights of Square Off
Square off happens before the closing time of the stock market. In India, it’s usually between 3:00 PM and 3:20 PM. The point of a square off is to ensure that all the open positions are closed or exited from. Square offs done by broking houses usually charge the investor an amount because the action of squaring off is being done by the broker.
