A Catalyst is a news or economic event that influences traders to buy or sell an asset quickly.
This generally prompts a change in value of that asset, and often times, at a higher pace than the asset’s normal volatility range.
A catalyst can really be anything, but for forex traders, catalysts tend to come from monetary policy news/changes (e.g., interest rate changes, quantitative easing), economic updates (e.g., changes in employment, inflation, GDP, etc.), and geopolitical updates (e.g., Brexit).
Identifying and understanding catalysts are a key component to a trader’s skill set as trading opportunities only come from when markets are moving, and from understanding when a directional bias may change.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.