Exclusive: Prop firms increasingly restricting News Trading

FNG Exclusive… FNG has learned that a number of leading (and not-so-leading) retail prop trading firms have begun to implement rules for their clients that restrict the trades that can be made (or, profit that can be booked) by traders immediately around major news events.

Prop firm news trading

The practice, known as News Trading, is a risky strategy whereby a trader takes a significant position in a security immediately before (or after) relevant economic or company/industry specific news is announced, that is likely to affect the price of the security. For example, taking a large long or short position in the shares of a publicly traded company right before that company is set to announce financial results.

News Trading was becoming an increasingly popular strategy in the prop trading world, both for traders in the Evaluation/Challenge phase looking to produce large profits in a short time frame in order to get “funded”, as well as for funded traders whose “real profits” depend on their ability to similarly produce outsized results, and who are less worried about losses than the potential for a large gain.

For prop firm clients – who often open numerous Challenges – the focus is more on getting some of the Challenges successfully over the finish line, at the expense of losing the other Challenges.

News trading restrictions

FNG has learned that over the past week or so a number of prop trading firms have instituted new rules, restricting the use of profits made around major relevant news events. Some have restricted News Trading for both Evaluation/Challenge phase accounts and Funded accounts, and some just for the Evaluation/Challenge phase accounts.

MyFundedFX

For example, MyFundedFX CEO Matt Leach posted the following note on the prop firm’s Discord channel mid last week (note that Discord is often the preferred communication method for prop firms with their clientele):

The news rule has been finalized.

Any positions opened or closed within 3 minutes of high impact news for the asset being traded will not count towards your profits. These are soft breaches meaning profits will be removed but you will not lose the account.

For ease of use we will be using forex factory to reference which high impact aka red label news events are prohibited.

If you are swing trader please close your position beyond the 3 minute window. We are exploring options to allow those with consistent success “swing” trading specifically to utilize TP/SL closures during the window but for the time being any executed position resulting in profits will be removed…

Funded Engineer

Funded Engineer CEO Tristian Talbot, known on Discord as Trader T, posted (back on April 10):

Effective immediately, we’re implementing a new trading rule across all Funded accounts. Simply put, any profits incurred within 2 minutes before or after high-impact news events won’t count towards your trading performance.

We’re doing this to maintain a trading environment focused on disciplined strategy and responsible risk management. Our aim is to discourage gambling behavior that doesn’t align with our values of sustainable trading practices.

By introducing this rule, we’re prioritizing a culture of thoughtful decision-making and long-term success for all traders. Thank you for your cooperation as we work together to create a thriving trading community.

You will notice this happening amongst many firms moving forward with 2 other large firms announcing the same rule a couple days ago.

However, Funded Engineer later softened somewhat its news related trading restrictions posting that:

After listening to community’s opinion, some changes to the “news trading” rule will be applied in order to create a fair environment for swing traders.

Any trades opened prior to the news event (1 hour, 1 day, etc.) and closed within the 6-minute period pre and post news will be counted. Your profit will be valid.

Profit from trades that are opened within the 12-minute window during high-impact news event on the affected currency will not be counted.

Trading during high-impact news events will result in the deduction of any profits made from trades executed within the restricted 12-minute window.

Let’s run a few examples:

Trader X takes a trade 2 hours prior to the news event and is not around on the charts at the time of the event. If the news event pushes the trade to the trader’s take profit, the profits will be accounted for.

Trader Z trades a high-impact news event, CPI, and takes a trade on gold (XAU/USD) 1 minute before the event is released. The trader then closes the trade 2 minutes later. Profits from this trade will not be accounted for.

A large number of traders use strategies they wouldn’t employ on a live trading environment. The goal of a evaluation firm is to provide a simulated trading environment where clients trade in imitated live conditions. Learning from skill in these environments which can later progress their trading careers

By adding this rule, we hope to inculcate improved risk management, very important in trading and life.

Blue Guardian

Prop firm Blue Guardian recently  altered some its News Trading rules, adding to its FAQ section:

Is News Trading allowed?

We allow news trading on challenge accounts.

However, we do not allow news trading on Funded accounts. For trades executed on your FUNDED ACCOUNT, please refrain from Opening/Closing trades 2.5 minutes before and 2.5 minutes after red folder (high-impact) news events. Any profits earned during this time will be subject to removal, without any account violation.

Which firms allow / don’t allow News Trading?

Prop firm info and comparison site Propfirmmatch recently came out with the following graphic listing the prop firms which do, and don’t, allow News Trading.

Prop firm news trading rule changes explained

The TradeUp YouTube channel explains some of the prop firm News Trading changes in the following video.