Prop Firm News Trading: The Forbidden Strategy?

Non-Farm Payrolls (NFP). CPI. FOMC. These are the most volatile moments in the market. Price can move 50 pips in 1 second. For a trader, this looks like free money. For a prop firm, this looks like a nightmare.

Why?

1. Slippage: It is impossible to fill orders precisely.
2. Risk: A gap can blow through a stop loss, putting the account in negative balance (which the firm has to pay).
3. Gambling: Traders open max lots long AND short (Straddle) hoping one hits. This is not trading; it's roulette.

What is "Restricted" News Trading?

Many firms (like FTMO "Standard" or standard FundedNext accounts) have specific restrictions:

• The 2-Minute Rule: You cannot open or close a trade 2 minutes before or after a "High Impact" news event (Red Folder).
• The Profit Deduction: If you violate this, they delete the profit from that trade. They usually don't ban you instantly, but they take the money back.

What is "Allowed" News Trading?

Firms like 5ers, Topstep, and FundedNext (Stellar) allow news trading. But even they have limits.

Allowed:

• Having an existing swing trade open during news.
• Entering a trade directionally based on the result.

Banned (Almost Everywhere):

• Bracket / Straddle: Placing a Buy Stop above price and Sell Stop below price 10 seconds before news. This is universally hated because it exploits the tech, not the market.
• Tick Scalping: Using a bot to scalp the liquidity gap.

Strategy: How to trade news safely

If you are at a "News Allowed" firm, here is how to do it without getting flagged:

1. Wait for the Initial Spike: Do not gamble on the first second. Let the number come out.
2. Trade the Retracement: Wait 1-2 minutes. Often price retraces 50% of the spike. Enter there.
3. Lower Leverage: Volatility acts as leverage. You don't need 10 lots. 1 lot will move like 10.

Top Firms for News Traders

1. The 5%ers: They want you to trade real market conditions. News is real. Allowed.
2. Topstep: Futures markets are built for news. Allowed.
3. FundedNext (Stellar): Specifically marketing "News Allowed".

Verdict

If your strategy relies on CPI/NFP volatility, you MUST choose a firm explicitly stating "News Trading Allowed". Do not risk a $10,000 payout on a firm with a "2-minute restriction". They will check the timestamps to the millisecond and deny you.