Understanding Prop Firm News Trading Policies
Proprietary trading firms have varying approaches to news trading during evaluation challenges. These policies are primarily designed to manage volatility risk and prevent account blowouts during high-impact economic events.
How Major Prop Firms Handle News Trading
| Prop Firm | News Trading Policy | Restricted Period | Penalty for Violation |
|---|---|---|---|
| FTMO | Allowed with restrictions | 15 mins before/after high-impact news | Challenge reset |
| The5ers | Prohibited during specific events | 30 mins before/after NFP, FOMC | Account termination |
| Topstep | Allowed with no restrictions | None | N/A |
| FundedNext | Conditionally allowed | Varies by instrument | Warning then reset |
Common Restricted News Events
- Non-Farm Payrolls (NFP)
- FOMC Interest Rate Decisions
- CPI Inflation Data
- GDP Releases
- Central Bank Speeches
Pros and Cons of News Trading During Challenges
Advantages
- High profit potential: Major news events often create large, tradable moves
- Clear catalysts: Reduced guesswork about market direction
- Fast results: Can help reach profit targets quicker when successful
Risks
- Slippage: Extreme volatility can lead to poor fills
- Rule violations: Many firms have specific restrictions
- False breakouts: News often creates whipsaw price action
- Emotional trading: Pressure leads to poor risk management
Expert Strategies for News Trading in Challenges
1. The Pre-News Preparation Method
Instead of trading the immediate reaction, prepare your trades 2-4 hours before the event based on expected outcomes:
- Analyze consensus estimates vs. whisper numbers
- Set pending orders outside expected volatility range
- Use wider stops to account for initial spikes
2. The Post-News Fade Strategy
Wait for the initial 15-30 minute volatility to subside, then:
- Look for overextended moves that may retrace
- Trade with the new established trend after consolidation
- Focus on technical levels that held during the spike
3. Correlation Hedge Approach
For firms that allow multiple instruments:
- Take offsetting positions in correlated pairs
- Benefit from relative strength/weakness
- Reduces directional risk while capturing news moves
Frequently Asked Questions
Do all prop firms restrict news trading?
No, policies vary significantly between firms. Some like Topstep allow unrestricted news trading, while others like The5ers have strict prohibitions around major events. Always review your specific firm’s rules before trading news.
How can I identify restricted news events?
Most firms provide an economic calendar highlighting restricted events. High-impact news is typically marked in red on platforms like Forex Factory. When in doubt, check your firm’s dashboard or support documentation.
What’s the safest way to trade news in challenges?
The conservative approach is to either: 1) Avoid trading entirely during restricted periods, or 2) Wait until 30-60 minutes after the news when volatility normalizes and clearer technical patterns emerge.
Key Takeaways for News Trading in Prop Challenges
Successfully navigating news events during proprietary trading firm challenges requires understanding your specific firm’s rules, managing risk appropriately, and having disciplined entry/exit strategies. While news trading can accelerate your profit goals, the heightened volatility also increases the chance of violating drawdown limits.
For traders serious about passing their evaluations, we recommend comparing prop firm news policies before selecting a challenge, and practicing news strategies on demo accounts first.