One-Direction Rule Explained

Definition

During major news events, traders may only take positions in one direction (long or short), not both simultaneously. Prevents hedging strategies designed to capture moves in both directions during volatility.

Explanation

This rule is typically activated during high-impact news events like NFP, FOMC meetings, or earnings releases when volatility spikes. Traders must choose either long or short positions but cannot hold both simultaneously on the same instrument. The rule forces traders to have directional conviction rather than playing both sides of expected volatility with straddle-like strategies.

Example

During NFP release, if you're long 2 ES contracts, you cannot simultaneously hold any short ES positions until you close the long trade first.

Why It Matters

This prevents complex hedging strategies that could exploit news volatility while forcing cleaner risk management during high-impact events.

Common Misconceptions

• The rule applies to all trading times

  Reality: Most firms only enforce this during scheduled high-impact news events

• You can't trade different instruments during news

  Reality: The rule typically applies per instrument - you can be long ES and short NQ simultaneously