head-and-shoulders pattern: A chart formation in a graph of an asset price that resembles three mountaintops in a row, with the middle mountaintop being taller than the other two. The pattern indicates a trend reversal, meaning that prices are expected to fall.

hedge: An investment strategy that allows you to reduce the risk of an unfavorable price change in a security or commodity. For example, a stockholder of ABC Company who is worried about declining stock prices can offset that risk by buying a put option on ABC, allowing him to sell his shares in the future at today’s price.