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What does square off trading mean?

Squaring off is a prevalent trading approach often utilised in day trading, involving the purchase and subsequent sale (or vice versa) of a specific quantity of assets, primarily stocks, within a single trading day to capitalise on price fluctuations and garner profits.

In day trading, investors leverage squaring off to capitalise on market volatility. By buying stocks and selling them at a higher price within the same day or vice versa, traders seek to generate profits. Squaring off can either mitigate losses or lock in profits from the current position, serving as a crucial aspect of intraday trading.

Typically, square offs occur before the stock market’s closing time. Broker-executed square offs may incur charges for investors due to the broker’s involvement in closing the positions. This process ensures the closure or exit of all open positions within the trading day, allowing investors to realise their gains or losses effectively.