Square off in the stock market refers to the process of closing an open position in the market. When a trader or investor has an open position, it means they have bought or sold a security but have not yet closed the trade by selling or buying the same security again, respectively.
Square off is used in two types of trades: intraday trades and positional trades.
In Intraday trading, square off refers to buying and selling of the same security on the same day. In this case, the position is squared off by the end of the trading day.
In Positional trading, square off refers to buying and selling of the same security over a period of time, the time frame is generally longer than a day.
In both cases, the goal of square off is to end the open position and realize any profits or losses. It can be done by manually placing an order to sell or buy the same quantity of shares as the original trade, or using an automatic square off system.
It’s important to note that square off is not the same as stop loss, which is used to limit potential losses by automatically selling a security when it reaches a certain price.