A hedging restriction is an evaluation rule prohibiting the simultaneous holding of opposing positions on the same instrument — most commonly, a long and a short on the same currency pair or asset at the same time, whether within the same account or across multiple accounts held by the same trader.
Hedging restrictions appear in two forms: same-account hedging bans (holding a buy and sell on the same instrument simultaneously within one account) and cross-account hedging bans (using one account to hedge exposure taken on another account on the same platform or evaluation). Both are enforced differently; both can result in evaluation termination where they apply.
Why programs restrict hedging
The stated rationale is that offsetting positions on the same instrument produce a net-flat exposure while consuming margin and potentially generating spread costs — they do not reflect directional trading skill, which is what the evaluation is designed to test. From a program integrity perspective, cross-account hedging specifically creates an arbitrage: a trader who holds a long on one evaluation account and a short on another guarantees that one account passes while the other fails, removing the genuine risk of the assessment.
Some trading strategies — including certain grid strategies and lock-hedging approaches — depend structurally on simultaneous long-short positions. These are incompatible with programs that apply hedging restrictions, regardless of their profitability in open markets.
Correlation and indirect hedging
Most hedging restrictions target same-instrument positions explicitly. Holding opposing positions on highly correlated instruments — for example, long EURUSD and short GBPUSD — is typically not prohibited unless the rules specifically extend to correlated pairs. Traders using multi-pair strategies should confirm the exact scope of the restriction before trading.
What to confirm in the rules
- Whether the restriction covers same-account hedging, cross-account hedging, or both.
- Whether it applies to all instruments or only specific asset classes.
- Whether holding opposing positions on correlated instruments triggers the rule.
- The consequence of a violation — automatic disqualification is common for cross-account hedging.
FundedProp’s position on hedging publishes in the rulebook before any evaluation opens for purchase. For related rule mechanics, see martingale restriction, news trading restriction, and breach.
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