How to Pick the Trading Catalyst That Gives You the Edge // Ep. 55

In This Episode

• Why there's no single best catalyst
• Other catalysts to think about besides chart patterns
• How to find the best catalyst for you

Is There a Best Catalyst?

A listener wrote in and asked about how to find the best trading catalyst. We give our tips and some of the common misconceptions about what a trading catalyst is and how to choose the best one for you.

The tricky thing is that a catalyst might not be what you think it is. Keep an open mind and you just might be able to find that trading trigger that works for you.

Read the Transcript:

Walter:    Hi, Hugh. So we have a question here from one of our traders. He is wondering about how he could go about trading and getting to the point where he knows which catalyst he should be using to trade. So he wants to find the right catalyst. My thoughts are  that inside of this question, if we sort of unpack it, he is basically saying that he needs to know what is the right pattern or the right catalyst.

The way I talked about it in the Naked Forex is, a catalyst is a pattern out of a certain support and resistance level. Obviously, you can use trend lines. You can use other things. You do not have to use support and resistance levels but a lot of traders do and that is why they kind of become obvious on the charts.

So what’s interesting is, he is kind of suggesting that he needs to find the right catalyst for him but that does not actually come up and say that. He actually said, “I need to find the right catalyst”. He does not say that all catalysts are making money, which one should I use or which one makes the most money.

He just says, I need to find the right one. So really what comes down to this I think is discovering what you as a person, what you think as a trader about the markets. What do you think they are going to do? What do you think they will do? What do you think they are likely to do?

That is all up to you. Double bottoms and double tops make a lot of sense to some people because they like to find that reversal point and then trend continuation patterns make sense to other people or breakouts make sense to other people. So it really depends on what you look for as a trader.

Does that make sense? What are your thoughts?

Hugh:    Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.

At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.

So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.

Hugh:    Yeah, totally. Actually, there’s kind of two questions in there. There is a beginner’s question of, he is actually saying what system should I use? And that implies some  sort of technical system or whatever. But, if you take a little deeper, it could also mean what works for me? What kind of catalyst should I be using?

That might not be a chart pattern. Maybe you are trading the cocoa market and you know something about the companies on the cocoa market and you use that as a trading catalyst and not necessarily what is on the chart.

So I think, a couple of things to consider there. Obviously, charts are good and we both like charts and you know most people trade with that but what are the better catalysts you could look at? I mean, that’s more in the futures and stock market maybe but FX has some of those types of catalysts also .

I know you look at the retail traders too. Their ratios and stuff like that and so that might be another catalyst that he can look at. So just something to think about there.

Walter:    Yeah, there’s a lot of triggers, aren’t there? For sure. I guess, I just want people to get away from this idea of like there is a best pattern or whatever. It is really about what matches up with you.

Hugh:    Yeah, totally. Cool, thanks.

Walter:    Thanks!

Hugh:    All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.

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