Should a prop firm allow hedging within one account?
Quick answer
Hedging within one account means holding a long and a short on the same instrument at once. Some firms allow it, since it is a legitimate risk tool; others ban it because it can be used to game rules or offers no real exposure. Hedging across different accounts is a separate and usually prohibited issue.
Detailed answer
Considerations:
- Allow: familiar to traders from platforms that support hedging.
- Ban: simpler risk picture, removes a way of locking in positions around rule boundaries.
Define clearly:
- Same instrument only, or correlated instruments too.
- Consequence: refuse the order, flag or breach.
PropExecutor's no hedging rule refuses an order that would open the opposite side of an instrument already held, with breach or flag as alternative actions. Hedging across accounts is detected in review rather than by a single-account rule.
Worked example
A trader holds 2 lots long EUR/USD and then opens 2 lots short. The net exposure is zero, but both positions pay the spread, and the trader can choose which side to close later. Some firms see this as legitimate risk management; others ban it because it can be used to freeze a loss near a daily limit.
Decide and document
Whatever your policy, write it down with the reason.
PropExecutor team · Updated
Related questions
All 33 questions in Challenge design and trading rules · Every category