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.