Using News Filters in Prop Trading Strategies

Introduction: Why Use News Filters in Prop Trading?

In the fast-paced world of proprietary trading, every second matters—especially during news releases. That’s why many traders turn to prop trading with news filter strategies to help them navigate volatility while maintaining consistency. These filters allow traders to avoid unnecessary risk, stick to challenge rules, and make decisions based on logic rather than emotion.

Whether you’re still in the evaluation stage or already funded, news filters can be your secret weapon for stable performance.

What Is a News Filter in Trading?

A news filter is a tool or technique used to limit trading activity during specific economic announcements or geopolitical events. Typically integrated into trading plans or automated strategies, news filters help traders:

• Avoid entries before or after scheduled news releases

• Minimize exposure during unpredictable price swings

• Comply with trading restrictions from prop firms (like the 5-minute window around major announcements)

These filters can be as simple as a calendar check or as advanced as integrated systems that block trade execution during certain times.

The Risks of Trading Around News Events

Trading during economic announcements—like interest rate decisions or inflation reports—can lead to significant slippage, spread widening, and failed trades. For prop traders, this can be particularly dangerous because:

• It increases the chance of violating daily or overall drawdown limits

• It can lead to disqualification from challenges if rules are broken

• The volatility often overrides technical setups, making strategy performance unreliable

Using a news filter helps eliminate these risks, especially when working within strict trading conditions like those at Larsa Capital.

How Prop Traders Apply News Filters Effectively

Here are several best practices for applying news filters in prop trading:

1. Integrate Economic Calendars into Your Plan

Make sure your daily routine includes checking an economic calendar. Filter for high and medium-impact news based on the currencies you’re trading. This allows you to:

• Avoid opening trades too close to event times

• Close positions if you’re already in the market

• Reschedule entries to after the news event settles

2. Use Alerts and Automation

Modern platforms allow traders to set alerts before news releases. Some even block trading execution during sensitive periods. This minimizes the risk of emotional trades and helps enforce discipline.

3. Backtest with News Filters Applied

When developing your strategy, run a backtest that excludes trades during news periods. This will help you understand how much your edge relies on—or suffers from—high volatility news environments.

4. Pair Filters with Other Risk Management Tools

A news filter alone won’t protect you. Combine it with:

• Proper stop-loss placement

• Risk-per-trade limits

• Time-of-day filters

• Market session restrictions

This layered approach keeps you protected and disciplined, even when markets move aggressively.

Why News Filtering Matters More in Prop Trading

In traditional retail trading, a bad trade may simply reduce your capital. But in the world of proprietary trading, one mistake could cost you a funded account.

Here’s why news filtering is essential in the prop trading with news filter framework:

• Challenge Rules: Most firms have strict guidelines around trading news. At Larsa Capital, for example, trades entered or closed within 5 minutes before or after scheduled news are excluded from profit calculations.

• Volatility Exposure: Even a technically perfect setup can get invalidated by a sudden spike. News filters help protect against these unexpected shifts.

• Consistency Focus: Prop firms reward consistency over luck. Avoiding the chaos of news trades improves long-term reliability and performance.

Common Mistakes Traders Make with News Filters

Even experienced traders sometimes misuse or neglect their filters. Here are a few pitfalls to avoid:

• Only focusing on high-impact news: Medium-impact events, especially in overlapping sessions, can also cause major volatility.

• Over-relying on automation: Automated filters can fail or lag. Double-check calendars manually as part of your routine.

• Ignoring indirect effects: Even if you trade EUR/JPY, a major USD release can indirectly impact volatility across the board.

A Prop Trading Strategy Built Around News Filters

To give you a real-world example, here’s how a trader might build a basic strategy that integrates a news filter:

1. Strategy: Trend-following on 15-minute charts using moving averages and RSI confirmation

2. Filter: No trades within 15 minutes before or after scheduled economic events affecting the traded currency

3. Rules:

   • No overnight trades

   • Max 1% risk per trade

   • Trade only during London and New York sessions

This structure helps avoid unnecessary risks and maintains a rules-based approach—exactly what proprietary firms value.

The Role of Larsa Capital in Risk Management

At Larsa Capital, news trading restrictions are clearly defined. Traders must avoid placing or closing trades within 5 minutes before or after any major scheduled economic event. This ensures that performance is based on skill rather than luck and reduces the chances of disqualification due to unexpected volatility.

To succeed in such an environment, mastering prop trading with news filter techniques becomes a fundamental part of your playbook.

Final Thoughts: Trade Smart, Not Just Fast

In proprietary trading, speed and aggression aren’t always your allies. Discipline, structure, and risk awareness are far more valuable. By incorporating a solid news filter into your strategy, you gain the power to trade more responsibly—without compromising performance.

If you’re ready to take your trading to the next level with real-world funding opportunities, consider starting your challenge with Larsa Capital—where rules are clear and risk management is prioritized.