Trading on News Announcements: A Rule That Varies by Prop Firm
News trading, or trading around economic announcements, involves taking positions right before or during the release of major macroeconomic data such as the NFP or Fed interest rates. The answer to whether it is allowed or forbidden is simple: it depends exclusively on each company's internal policy. Some firms allow it without restriction, others prohibit it entirely, while a third category imposes precise time limits, such as forbidding trading 2 minutes before and after the news. Before starting, it is crucial to check our comprehensive prop firm comparison to identify those matching your trading style.
Why Do Prop Firms Restrict News Trading?
Proprietary trading firms primarily seek to limit extreme volatility. When a key figure is announced, the market can experience sharp price movements, creating significant price gaps known as slippage. For a prop firm, these moments present two main risks:
- Technical risk: The difficulty of executing orders at the desired price during high volatility can cause losses inconsistent with the trader's risk management plan.
- Financial risk: Rapid gains or losses on a challenge account are often perceived as "gambling" rather than disciplined trading, which does not match the trader profile sought by these structures.
To better understand how your capital management is monitored, feel free to consult our risk management guide.
How to Identify Your Firm's Policy?
Each company has its own terms and conditions. It is mandatory to check the FAQ or Dashboard of your account. Here are key points to watch:
The Economic Calendar
If the firm prohibits news trading, it usually specifies which types of events are targeted (generally high-impact economic calendar events). Ignoring this rule can lead to immediate account disqualification, even if your trade was profitable.
Slippage Tolerance
Some brokers used by prop firms offer better market depth than others. If you are hesitant, compare specific rules via a FTMO vs The 5%ers comparison, as their policies often diverge radically on this point. Some allow trading during news but do not count profits made within the two minutes surrounding the announcement.
Strategies for Navigating These Conditions
If trading during announcements is allowed, your approach must be rigorous. Volatility does not forgive execution errors. It is recommended to favor pending orders or reduce your usual position sizes. Remember that professional trading requires discipline. If you are going through a period of doubt, reading our trading psychology guide can help you stay focused on your strategy rather than the adrenaline of the news. Finally, if you wish to delegate the technical management of your account, learn more about our challenge validation services to ensure compliance with all operational constraints imposed by your chosen firm.
This article is for educational purposes only and does not constitute investment advice. Trading involves risk of capital loss.
