Introduction
News trading is a popular strategy among forex traders who aim to capitalize on the volatility triggered by economic announcements and geopolitical events. For traders seeking funding through proprietary trading firms, understanding whether news trading is permitted is crucial. FTMO, one of the most prominent proprietary trading firms, has specific guidelines regarding trading around news events. In this article, we will explore FTMO’s stance on news trading in depth, analyze the reasoning behind their policies, examine the implications for traders, and provide insights on how to operate within FTMO’s framework without violating any rules.
Understanding News Trading
News trading involves executing trades before, during, or after major economic events or breaking news, such as central bank interest rate decisions, non-farm payroll reports, inflation data, and geopolitical developments. These events often cause sharp and sudden price movements, creating both opportunities and risks for traders.
Traders who use this strategy generally anticipate significant moves based on economic forecasts and news reports, aiming to profit from rapid price changes. While potentially lucrative, this strategy carries substantial risk due to increased volatility, slippage, and spread widening.
FTMO’s General Trading Rules
FTMO allows traders to participate in a two-phase evaluation process: the FTMO Challenge and the Verification stage. After successfully passing both, traders receive a funded account. However, FTMO imposes rules that govern risk management, trading behavior, and trading timeframes. These rules are designed to protect the capital of the firm while promoting disciplined trading behavior.
One of the key aspects FTMO monitors is trading around high-impact news events. FTMO makes a distinction between normal trading and high-risk strategies that could jeopardize account integrity.
FTMO’s Policy On News Trading
FTMO permits news trading under specific conditions. While many prop firms outright prohibit it, FTMO’s policy is more nuanced. Here are the core elements of FTMO’s approach to news trading:
1. News Trading Is Not Completely Prohibited
FTMO does not universally ban trading during news events. Traders are allowed to execute trades around news releases; however, they must adhere to certain guidelines. These guidelines are in place to prevent exploitation of price feed manipulation and to maintain market fairness.
2. Breach Of Account Due To News Trading Behavior
Although FTMO does not prevent traders from being active during news periods, they closely monitor positions opened or closed within a short timeframe before or after a high-impact event. Specifically, FTMO discourages trading that seeks to exploit unrealistically fast market movements, artificial slippage, or price feed discrepancies.
If a trader is found to be engaging in strategies that aim to benefit from these anomalies, they risk breaching the rules of the funded account. This applies especially to trades that:
- Are opened seconds before a major news release and closed immediately afterward
- Appear to be executed solely to take advantage of price spikes or server lag
- Generate unusually high returns during news releases, followed by a pattern of inactivity
3. Evaluation Stage Scrutiny
During the FTMO Challenge and Verification stages, the company pays extra attention to risk exposure around news events. While trades are not automatically disqualified for being close to news releases, if the risk is considered excessive or unrealistic, the evaluation may be rejected. Traders are advised to be cautious and avoid overleveraged positions during these periods.
4. Funded Account Restrictions
Once traders receive a funded FTMO account, they must adhere to stricter guidelines. FTMO has been known to issue warnings or suspend accounts for those who repeatedly engage in high-risk news trading behavior. Even though the rules do not explicitly state a ban, the consequences of repeated violations can be severe.
Types Of News FTMO Monitors Closely
Not all news events are treated equally. FTMO generally focuses on high-impact economic indicators and central bank decisions. These include, but are not limited to:
- Non-Farm Payroll (NFP)
- Consumer Price Index (CPI)
- Federal Reserve and European Central Bank interest rate decisions
- Unemployment rate releases
- GDP growth data
- Major geopolitical events or speeches by central bank officials
Traders should monitor economic calendars and be aware of upcoming high-impact news to ensure they are not unintentionally caught in a volatile situation that might be deemed risky or irresponsible.
Reasons Behind FTMO’s News Trading Policy
FTMO’s policy is built on the principle of risk management. The firm is not just interested in a trader’s ability to make profits, but in their capacity to do so consistently and responsibly. Here are some of the primary reasons why FTMO monitors news trading:
1. Platform Liquidity And Slippage
During major news releases, liquidity can disappear, spreads can widen dramatically, and slippage can occur. This can result in price quotes that are inconsistent or highly variable. Traders who attempt to profit from these anomalies risk creating unfair trading environments.
2. Protection Against Server Exploitation
High-frequency trading strategies aimed at exploiting price feed lags or server response times undermine the integrity of trading platforms. FTMO’s policy is designed to prevent such exploitation and maintain a level playing field for all traders.
3. Emphasis On Long-Term Consistency
FTMO wants traders who demonstrate a stable trading style over time. Profits gained from one or two high-risk trades during news events are not indicative of skill or consistency. By discouraging aggressive news trading, FTMO emphasizes sustainable performance and risk management.
How To Approach News Trading With FTMO
Traders who enjoy trading around news events can still do so with caution. The key is to maintain risk control, transparency, and strategic intent. Here are some recommendations:
1. Use Wider Stop Losses And Take Profits
Avoid extremely tight stops or take profits, as they are more likely to trigger during high volatility. Using realistic targets reduces the risk of being flagged for news-based exploitation.
2. Avoid Scalping Immediately Before Or After News
FTMO discourages opening and closing trades within seconds around major announcements. Instead, wait until the initial volatility subsides before executing positions.
3. Monitor Your Trade Timing
Avoid opening a position within one to two minutes before a scheduled high-impact release. This minimizes the chance of appearing to exploit price spikes.
4. Document Your Trade Rationale
Maintaining a trade journal that explains your reasoning for each trade — especially those near news events — helps demonstrate that your strategy is legitimate and not opportunistic.
Comparing FTMO With Other Firms On News Trading
In comparison with other proprietary firms, FTMO offers a more lenient approach to news trading. Some firms have strict prohibitions on holding positions during news, even requiring positions to be closed minutes before the event. Others automatically disqualify any account showing high gains during such periods.
FTMO stands out by allowing flexibility, but with increased monitoring. Traders looking for a middle ground between freedom and structure may find FTMO’s model more accommodating than firms with blanket bans.
Consequences Of Violating FTMO’s Guidelines
If a trader violates FTMO’s rules regarding news trading, several outcomes are possible:
- Evaluation failure: The Challenge or Verification may be rejected due to unnatural trading behavior.
- Funded account suspension: The account can be paused or terminated if trades are flagged for risky behavior.
- Profit withdrawal denial: In cases where FTMO suspects rule violations, profit payouts may be delayed or rejected pending investigation.
To avoid these issues, traders must remain transparent and follow best practices in risk management, especially when trading near volatile events.
Conclusion
FTMO allows news trading, but within a structured and carefully monitored framework. Traders are not explicitly prohibited from participating in the market during economic announcements, but they must avoid behavior that appears exploitative or excessively risky. Understanding FTMO’s nuanced policy is essential for maintaining compliance and succeeding within their ecosystem.
Disciplined traders who take a calculated approach to news trading — avoiding scalping immediately before or after announcements and documenting trade rationale — can navigate FTMO’s rules successfully. Ultimately, the goal is to showcase consistency, risk awareness, and professionalism, all of which FTMO highly values in its trading community.
