A news trading rule limits or bans trading around major economic announcements, such as interest rate decisions or jobs reports. Prices can jump past stop losses in seconds at these moments, so firms restrict the risk. The restriction may ban opening new trades within minutes of the release, ban closing trades in that window, or ban holding open trades through it.
The rule often differs between the challenge and the funded stage. Some firms allow news trading during the evaluation and ban it once funded, or the other way round. FTMO's funded stage, for example, bans trading within two minutes either side of a major announcement, and the list of covered announcements is set by the firm, not by the trader.
A strategy built on fast moves at release time is unusable at a firm that bans it, no matter how well it worked elsewhere. Check the rule before you buy, not after you build a strategy around it.
The common trap is assuming that holding through news is the same as trading it. At firms that ban holding through a release, an open position at the announcement counts as a breach even if you opened it hours earlier. Read whether the rule covers opening, closing, holding, or all three. Prop trading can cost you every fee you pay.