The Prop Trader's Dictionary

From drawdown rules to payout splits — every term you need to understand, master, and pass your challenge.

H

Hedging

Hedging is a risk management strategy used by traders and investors to offset potential losses in one position by taking an opposing position in a related asset. It acts as a form of insurance, reducing exposure to adverse price movements. While hedging can limit downside risk, it may also cap potential profits.

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Head and Shoulders Pattern

The head and shoulders pattern is a technical analysis formation that signals a potential reversal from an uptrend to a downtrend. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — with a neckline connecting the lows between the peaks. A confirmed break below the neckline typically signals the beginning of a bearish move.

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2+ terms

Explore all glossary terms currently grouped under the letter "H".