Hedging at prop firms: what counts as a rule violation, and why?

November 2, 2026.

Hedging is an established risk management method in traditional futures trading.

At prop firms, however, certain forms of mutually covering positions are prohibited, as they can be contrary to the goal of trading evaluations.

The rule is especially important for those who manage multiple trading accounts, or trade with correlating instruments, for example with NQ and MNQ.

Therefore it is worth clarifying what hedging means, to what position combinations the prohibition can apply, and what justifies this at futures prop firms.

What is hedging in futures trading?

Hedging, that is a hedge transaction, is such a risk management method where an existing market exposure is partially or fully offset by another position.

In traditional financial markets this is used among others to moderate the risks originating from price changes.

The manager of a stock portfolio for example can decrease the risk originating from the price fall of the portfolio with an index futures short position. The hedging position, at the same time, can also moderate the possible profit.

Hedging is therefore in itself an accepted risk management method, but its application is not allowed in every trading environment.

In the evaluation programs of futures prop firms therefore separate rules can apply to mutually covering positions.

What counts as prohibited hedging at a prop firm?

Numerous futures prop firms prohibit opposing positions held simultaneously in identical or correlating instruments.

This restriction does not necessarily apply only to transactions within a single account. It can also be valid when using multiple trading accounts together.

A simple example:

A trader manages two prop accounts, and at the same time holds opposing positions from NQ contracts of the same expiration:

• Account A: Long 1 NQ

• Account B: Short 1 NQ

In this case the market exposure of the two positions is opposite to each other, thus the profit originating from one price movement can be offset by the loss of the other position.

This is a typical example of hedging between multiple accounts, which numerous futures prop firms prohibit.

The rule can also extend to different contract sizes. The NQ and MNQ for example are built on the exact same Nasdaq-100 index, therefore opposing positions held in these can also cover each other's market exposure.

Why do prop firms prohibit hedging?

The goal of the evaluation programs of prop firms is for traders to prove their trading abilities and consistency alongside determined risk limits.

During the evaluation therefore alongside the fulfillment of profit targets the management of losses, position sizing and the keeping of trading rules is also important.

The use of mutually covering positions, however, can make it difficult to judge the trader's actual risk-taking and performance, especially if the positions are held on multiple separately evaluated accounts.

The goal of the hedging prohibition is preserving the credibility of the evaluation, as well as ensuring that the trading results reflect true market decisions and consistent risk management.

The restriction at the same time helps prevent the improper exploitation of the evaluation conditions.

How does the hedging prohibition apply to Solo Clash accounts?

The rulebook of Solo Clash prohibits opposing positions held in identical or mutually correlating instruments.

The prohibition also extends to the following cases:

• Holding opposing positions within a single trading account.

• Holding mutually covering positions on multiple accounts of the same trader.

• Applying opposing positions coordinated with another trader.

The rule therefore does not exclusively take into consideration the trading activity of a single account, but the correlations between the accounts managed by the trader too.

The violation of the rule referring to hedging can result among others in the invalidation of the affected transactions, the denial of payout or the termination of the trading account. The consequences depend on the circumstances and severity of the given case.

The exact and at all times valid conditions are contained in the official rulebook of Solo Clash.

Frequently asked questions (FAQ)

Do opposing positions of NQ and MNQ also count as hedging?

Yes, they can form a hedging-type position combination, since both contracts are built on the same underlying index.

The rulebook of Solo Clash also prohibits opposing positions of identical or correlating instruments.

Is the prohibition valid between multiple own trading accounts too?

Yes. The rules of Solo Clash referring to hedging are valid jointly for the accounts managed by the trader too.

Therefore the positions of the individual accounts cannot in all cases be treated independently from each other.

Do positions in the same direction also count as hedging?

Positions in the same direction in themselves do not form an opposing hedge transaction with each other.

To trading executed on multiple accounts, however, other rules can also apply, therefore these must be checked separately.

Summary

Hedging is a risk management method applied in futures markets, however in the evaluation systems of prop firms certain forms of mutually covering positions are prohibited.

The goal of the restriction is that the trading results and the risk management be credibly evaluable, as well as that every participant fulfills the requirements of the program according to identical basic principles.

The rules of Solo Clash extend equally to opposing positions within a single account, between multiple accounts and coordinated with another trader.

The knowledge and keeping of the rules is a fundamental part of responsible prop firm trading.

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The article serves an educational purpose, and does not qualify as financial or investment advice.