To square off is to take the offsetting trade that flattens a position. Buy 100 shares in the morning, sell 100 in the afternoon, and the position is squared off. The term is standard Indian market usage and appears in broker interfaces, contract notes and margin policies.
It matters most for intraday products. When you buy under an intraday product code rather than a delivery one, you have told the broker the position will not be carried overnight, and in exchange you get higher leverage. The obligation to close before the session ends comes with that leverage.
Voluntary versus automatic
| Type | What triggers it | What it costs |
|---|---|---|
| Voluntary | Your own exit order, or a strategy rule closing the position | The normal transaction cost stack |
| Auto square-off | The broker flattening open intraday positions ahead of the 3:30 pm close | The cost stack plus, at many brokers, a separate auto square-off charge per order |
| Risk square-off | Margin shortfall or an exchange or surveillance action | Cost stack plus whatever price the market gives you |
Auto square-off cut-off times are set by the broker, not the exchange, and differ across brokers and segments. Check your broker’s product policy rather than assuming a common time.
The cost consequence
Squaring off within the day changes which tax you pay. Equity intraday attracts STT of 0.025% on the sell side only, while equity delivery attracts 0.1% on both buy and sell (Zerodha charges). The per-trade tax is lower, but an intraday strategy trades roughly 250 times a year instead of 12, so the total is usually far higher.
Auto square-off is also the worst execution in the day. Every intraday participant is flattening in the same window, and you are a forced seller with no discretion over price.
Caveats
Intraday trading is where the documented retail losses are concentrated. SEBI’s study of the equity derivatives segment found 93% of individual traders made net losses over FY22 to FY24 (SEBI, September 2024). Turnover is the mechanism: a strategy that squares off daily has to clear the round-trip cost every single day before it earns anything.
If you backtest a strategy that squares off every session, model the full cost stack before you look at the return. Without it, the result is arithmetic about a market that does not charge fees.