It’s common advice: “Always use a news filter in your trading system.” The logic behind it is simple—economic events cause volatility, so avoiding them must improve your system’s reliability. But while news filters can be helpful, the idea that every system must include one is a myth. In fact, depending on your strategy, including a news filter might do more harm than good.

Let’s unpack the nuance behind this popular belief.

What Is a News Filter?

A news filter is a rule that tells your trading system to pause or avoid entries during high-impact news events—such as:

• Central bank rate decisions
• Non-farm payrolls
• CPI or GDP announcements
• Geopolitical events

The aim is to protect your system from unpredictable volatility spikes and whipsaws during news releases.

Why News Filters Can Help

For many systems—especially short-term or intraday strategies—sudden news-driven volatility can cause spreads to widen, slippage, or stop-loss hits.

In such cases, a news filter helps by:

• Reducing exposure to random spikes
• Improving consistency of execution
• Avoiding false breakouts triggered by algorithms

But Do You Need a News Filter in Every System? Not Necessarily

There are several reasons why a universal news filter isn’t always beneficial:

1. Long-Term Systems Don’t Need It

If your system holds trades for days, weeks, or months, the temporary volatility from news often gets absorbed within the overall trend. Exiting or avoiding trades due to every news release might lead to unnecessary missed opportunities.

2. Some Strategies Rely on Volatility

News events create opportunity as much as risk. Volatility breakout systems, mean reversion plays, or statistical arbitrage models may be designed specifically to trade around news.

Adding a news filter to these strategies could remove the very edge they rely on.

3. Inconsistent News Impact

Not every news event moves the market. Some forecasts are already priced in. Others underperform or get overshadowed by bigger themes. Rigidly filtering trades based on a calendar can lead to inefficiency and overcomplication.

4. Backtesting Gets Messy

Adding a news filter into a historical backtest can be tricky. Many retail platforms don’t account for exact event timing or market reaction windows accurately. This can distort results and misrepresent real-world performance.

When You Should Use a News Filter

• Scalping or high-frequency strategies
• During known high-impact events like FOMC or ECB
• When your system is sensitive to slippage or spread widening
• If your system repeatedly underperforms during volatile news releases

Best Practices for Using News Filters

• Don’t apply them blindly—test whether excluding news hours actually improves results.
• Tailor the filter to the specific impact level and event type.
• Use realistic time buffers (e.g. avoid trading 15 minutes before and after major events).
• Combine with other tools like volatility filters or ATR to refine entries.

Conclusion: News Filters Are Optional, Not Mandatory

While news filters can be a valuable risk-control tool for some trading systems, they’re not a one-size-fits-all solution. Whether to include one depends on your strategy type, trade duration, and sensitivity to short-term volatility.

If you’re building systems and want to learn when and how to use news filters effectively, our Trading Courses walk you through advanced strategy design with practical, real-world testing techniques.