Beginners guide: What is meant by Squaring off?

by khalid on 14/10/2011 · 2 comments

Squaring off is a term which we often come across while investing in the markets. It is referred to as the process whereby investors/traders buy or sell shares and later on reverse their trade for completing a transaction.

Indian equity markets are open between 9:00 am and 3:30 pm normally. On special occasions there are sun outages while the satellites fail to link to ground infrastructure of the two exchanges. On these occasions trading period is extended till 4:15 pm in order to compensate for the lost time. For example you purchase 50 shares of say Tata Steel after which you sell them just before close of the market then it is said to be a squared off position. In the same way if you sell 100 shares of Infosys and purchase them later before the markets close then you have squared off your sell position. As per the Indian Equity markets the investors are allowed to engage in day trading.

The day trading is a mechanism when investors/traders can buy, for example 100 shares of a company when both BSE, NSE opens and then sell the same amount of shares later before the close of both the exchanges. But a stock purchased on BSE cannot be sold in NSE in a day trading scenario and vice-versa. In the same manner investors or the traders can sell first and buy later during the course of the day in order to square of the positions.

Bell the Bull says: Squaring off is a situation of day trading where in the stocks are bought and sold on the same day and no positions are carried forward.

 

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Chirag October 31, 2011

Simple and easy to understand! It helped me while I was making him understand 🙂

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