The simplest synonym to pair trading is “Correlation Trading”.

The ideology of this trading strategy is that if there is a correlation among two stocks, a pair can be
formed with a view that the under performing stock will eventually go up more and the over performing
stock will eventually fall in price.

Execution of the pair trading strategy:

 Leg 1 - Buy the under performing stock as it is expected to go up.

 Leg 2 - Sell the over performing stock as it is expected to go down.
A pair trading strategy can be implemented across multiple financial instruments and asset classes.
This answer is to help you give you conceptual clarity only.

Hope this helps.

Pair Trade is a market-neutral options trading strategy, where stocks of two companies with correlated
prices are traded together to hedge risks. This option trading strategy is based on the analysis of the
price relation between two stocks and facilitates low-risk profit by taking long position on the under
performer and short position on the over performer.The best part of Pair Trading is – “you do not need
to worry about the stock price direction which may go either up or down”.

Benefits of Pair Trading-

Market Neutral - Pair trading is Market Neutral, meaning that you can make money in both up
trending and down trending market.

Low Risk - As Pair Trading is based on Statistical Arbitrage principal, there is an inherent floor for the
maximum loss you might make. Generally speaking the losses will not break your back and you can
always bounce back.

Liquid and Flexible - Pair Trading gives you complete flexibility and is highly liquid i.e. you can enter
or exit your position at any time to book profit or cut the losses.

Maximum profit is caped – Similar to the maximum losses, the maximum profit is also caped in
this strategy. The bottom line is single pair trade (of course with reasonable lot size) cannot make you
extremely rich or extremely poor, however a series of pair trades can.

Basic steps for successful Pair Trading-

Identify two stocks which move similarly – A relative comparison of stock price movement over
at least one year can give you a fair idea about co-integrated price movement. By co-integrated price
movement we mean that the difference of stock price remains constant over a period of time and the
deviation in stock price difference is mean-reverting. You guessed it right – The pair trade opportunity
arises when there is a significant deviation in stock price differential from the mean. To know more
about co-integrated stock pairs please

Monitor the stock price movement – You have to basically look for significant deviation in
difference of price of the stock pair identified in step 1 from mean difference. Confused? Don’t worry.
Things will be clear while you go through the example below.

Execute the trade – Once you have spotted a significant short term deviation from mean price
differential, you have to Sell high priced stock and Buy low priced stock.
TATAMOTORS and TATAMTRDVR price comparison chart-

TATAMOTORS and TATAMTRDVR stock price difference and stock price difference
mean chart-

What is square off in stock market?

In stock market square off simply means closing your existing position

Example

You are a day trader or derivative trader

10Am you entered in a long position (BUY) of

DISHTV LTD at Rs 100 for 5000 shares

Now let's say at 1pm DISHTV Is trading at 101

Now you can simply book profit by entering in short position (SELL) At Rs 101

By selling your shares at Rs 101 means squaring off position

SO it simply means entering into opposite position

If u are already long, you can short in order to square off

OR If you are already short then you can enter into long position to square off

20.3k views · View 14 Upvoters · Answer requested by Rama Mohan

Square off is a trading style used by traders mostly in day trading, in which a trader buys or sells a
particular quantity of an stocks and later in the day reverses the transaction, in the hope of earning a
profit.

For example: Person A buys 100 shares of SBI from the BSE Sensex through a broker for a price or Rs
10 per share. Later in the day, Person A sells all the shares for Rs 12 per share and by paying broker
charges of Rs 10. The net profit A earns is Rs (200-10)=Rs 190.

Therefore, the trader has basically squared off his position.

Square off literally means that you make zero of your trading positions.

Case 1

You buy 100 shares of L&T at 1300 the price goes up 1350 you sell of 100 shares

Your net position would be 0

Case 2

You short sell 100 shares of Infosys at 1000 the price goes up 1150 you buy 100 shares

Your net position would be 0

 10.1k views · View 3 Upvoters

Related QuestionsMore Answers Below

 When can I buy Square stocks?

 Should I purchase Square stock?
 What does Square Earnings mean to the stock market?
 Futres in stock market?
 JOBBING in STOCK market?

Raj Mondal (राज मंडल), SEBI Registered Investment Adviser

Answered Sep 7, 2017 · Author has 1.1k answers and 2.7m answer views

I read an article in EconomicTimes which beautifully answers your query with an example. Here is the
link. Definition of 'Squaring Off' - The Economic Times

If you want to get helpful investment and technology updates, you should visit my YouTube
channel. TarMon Talks

11.8k views · Answer requested by Darshan Golghate

Rishi Mishra, mba from Devi Ahilya Vishwavidyalaya, Indore (2017)

Answered Jul 26, 2018 · Author has 152 answers and 69.2k answer views

Squaring off is a trading style used by investors/traders mostly in day trading, in which a trader buys or
sells a particular quantity of an asset (mostly stocks) and later in the day reverses the transaction, in the
hope of earning a profit (price difference net of broker charges and tax).

A trader covering is buy order with his sell order or a trader covering his short sell order with a buy
order on a same day can be called as square off his open position in NSE market.

So if Any Trader doing stock trading will put a buy order for buy transaction and then sell order for sell
transaction or short sell by selling first and covering his short sell by buy order is called Intraday square
off .

4.1k views · View 1 Upvoter

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Hitesh Dixit, A Part of Stock Market Research Team at NTA

Answered Sep 5, 2019

Squaring off is one type of trading style used by traders/investor mostly in day trading, in which a
trader a trader buys or sells a particular quantity of shares and later in the day reverse the transaction,
in the hope of earning profit.

Square off Meaning in share market

A trader conveying buy order with his sell order or conveying his short sell order with a buy order on a
same day can be called as square off his open position in share market.

What is square off in Intraday Trading?

Any trader doing day trading will put a buy order for buy transaction and then sell order for sell
transaction or short sell by selling first and covering his short sell by order is called Square off in
Intraday trading.

Description:

 If trader has bought 100 shares of Axis Bank in the morning @ ₹680 each and he sell same
day before closing the market @ ₹690 it is termed as that a trader has square off his position
in Axis Bank for the same day (Intraday trading)
 Same way if the trader short sells 100 shares of Tech Mahindra @ ₹ 640 and covers it with a
buy order on the same day @ ₹ 620 before market closed.
 Therefore, the trader has squared off his position in intraday trading.
Any trader does intraday trading has to square off the position before closing the market. For example,
is a trader bought Tata steel @ ₹650, he has to sell before the market close and square off his position
even if the rate has gone below the buying price of 650₹ he has to book loss.

If trader doesn’t square off all his position before closing time of the market, the broker will
automatically square off all the intraday positions and booked the profit or loss which depends on
the outcome of the trade. So, if you are doing an intraday trading you have to square off all your day
trading positions before market close then Nifty Trading Academy help you.

233 views

Daiyaan Consultancy Services, Provides consultation equity and commodity trading day & inv

Answered Aug 17, 2017 · Author has 332 answers and 278.7k answer views

Squaring off is a trading style used by investors/traders mostly in day trading, in which a trader buys or
sells a particular quantity of an asset (mostly stocks) and later in the day reverses the transaction, in the
hope of earning a profit

Simply, it is closure of any open position of the day before market closing. Most of the brokerage firms
have auto square off process at 3:15 pm both for NSE and BSE.

It takes place when one is unable to close Intraday position before this time.

9.3k views · View 3 Upvoters · Answer requested by Anupama Rani

To square off in stock market simply means to close all your open positions before the end of the day.
So, if in the morning you have bought shares first in MIS intraday order, then before the end of the day
you need to sell them at the same quantity (which is same activity as square off position). It is better
that a trader squares off his positions by himself, otherwise the concerned broker automatically squares
them off at the specified time (varies on brokers, mostly at 3:20pm). Some brokers charge a square off
fee. So it is always better to square off all your positions before the end of the day. There are other few
brokers who don’t charge on auto square off service.

82 views

Gaurav Arora, founder Jaypee capital India n Jaypee international inc USA
Answered Mar 17, 2017 · Author has 1.1k answers and 930.5k answer views
Squareoff means closing your deal. If you have bought something selling the same would be called
square off and same way if you have short sold anything buying back would be called square off.

“ Stop loss” is a facility provided in electronic trading. When the market is volatile and when prices are
moving past, you decide as to how much you can bear the loss and put that rate to square off.

E.G: When you buy 100 shares of SBI @ Rs 250 and you can bear a max. Loss of say Rs 500 you can put
Stop Loss sell 2 Rs 245 and come out. Similarly for sale transactions when the prices go up.
In stock market what is meant by delivery and square off?
Delivery means you wants to hold that equity open position more than 1 day.

Delivery based trading in India works on a T+2 rolling settlement cycle.

means when you buy shares on, say,

Monday (also called T day),

Tuesday (T + 1 day ),

you get the shares on Wednesday (T + 2 day).

Similarly, if you sold (square off) the shares on Monday,

you are required to give delivery of the shares on Wednesday (T+2 day).

Let me give you a clear example of square off

If you bought some stock at some price after that you are ready to book (profit or loss) of those stock.
So, you need to square off those stock means you are going to sell those stock.

Similarly, if you short some stock at some price after that you are ready to book (profit or loss) of those
stock. So, you need to square off those stock means you are going to buy those stock.

These are technical term which are usually seen in day trading or moreover margin trading in which
you invest only some 10-15% of your corpus and rest of the margin is given by your AMC like icicidirect.
Square off means if you want to close all your positions (buy and sell) on the same day. Square off
means closing out an open position before the end of settlement.
example : suppose you bought 100 share of Infosys @9:50 Today with a price of 987, as long as you
don't sell them these remains the open position and you can square off (sell) them in a same day to your
desired price.

Delivery means : on the same above example if you chose not to square off the 100 share of Infosys on
same day , you can choose to convert these 100 shares of Infosys for the delivery in your demat. in case
of delivery here you have to cover the margin provided by your bank too means you have to pay aback
margin provided by bank ,