Chapter 1

Learning the Catalyst Trade

The beautiful thing about the stock market is you don’t have to be a market guru to make serious money with it. Stocks make simply paying attention a highly profitable venture. If you can spot something game changing early, or better yet, before almost anyone else you will win.

After catalyst trading for over a decade I have developed a strategy that I realized should be described to benefit new and seasoned traders alike. This strategy is simple enough to give new traders a serious edge to beat the market, yet comprehensive enough that it will add valuable insight for experienced traders. A recent series of highly profitable catalysts with several more on the horizon have made the need to write this book apparent.

Catalyst trading allows the general rules of the stock market to be broken. The rules such as: “Don’t play penny stocks”, “Short term/day trading is too risky”, or even, “Don’t borrow money to play the market” can be broken after properly evaluating an impending catalyst. None of these should be taken lightly, but this book will explain in detail how each of these rules can be broken in the safest and highest probability manner to achieve what most would consider once in a lifetime returns an unlimited amount of times.

This book will define and illustrate the principles of the catalyst trade and how they play out time and time again. The beauty of the strategy is in its simplicity. Pay attention, get in early, and gradually sell the position as the hype starts to take off. However, there is certainly a learning curve involved and so this book intends to break down catalyst trading by:

  • Defining and illustrating profitable, high probability, catalyst cycles
  • Describing strategies to profit from each phase of these cycles
  • Utilizing examples of historical catalysts and the way in which their corresponding industry’s stocks performed, thus giving the reader usable experience to trade future catalysts profitably
  • Giving analysis and actionable trading strategies for the coming cannabis catalyst
  • Learning to foresee and recognize inevitable future catalyst opportunities

Catalysts often produce exponential stock gains, so getting in before the stocks move makes it difficult to lose on the trade. This may seem too good to be true, but several historical examples will be given to prove the point.

The purpose of this book is for the reader to learn from my experiences and acquire the knowledge I’ve come to find over the last decade of catalyst trading. Thus, assisting the reader in learning a valuable skill. Trading and investing can become more than just supplemental income. My aim is to teach the reader to make multiples on their money, not mere percentages.

The goal of investing and trading is quite simply financial freedom. Money may not buy happiness, but debt buys hardship and relieving that burden certainly inspires happiness. I would argue that catalyst trading is a useful tool for acquiring financial freedom when utilized properly.

High probability coupled with exponential returns add up to life changing opportunity. However, this is not a get rich quick scheme. Getting in on the trade before the crowd requires patience. It will often take several months for the trade to fully play out from the date of purchase to sale, so patience, commitment, and conviction are essential.

The dictionary defines a catalyst as, “something that precipitates a change.” The operative word of that definition is “precipitates”. It brings about the change yet can be foreseen well in advance. This is the whole idea of catalyst trading. When a major change is on the horizon a trader may recognize the significance, and take action by purchasing stocks within that industry.

There are several types of catalysts. Each of which must be approached and analyzed uniquely. With regard to the stock market, a catalyst is any news event that moves the stock of a specific company, industry, or even the world markets in a positive or negative direction. Many are company specific which can range from a new product release to earnings reports or clinical trial data, etc. Exponential gains are the goal, so bigger is always better.

This book will focus on learning to find major catalysts offering once in a lifetime opportunity. The highest probability catalyst trade occurs when a Federal Law is changed, and therefore, is the focus of this book.

The sub-title references a search for the “sure” bet. In most regards, that is a misnomer. I would argue stocks are not in the same category as gambling. Many regard the stock market as a form of gambling, but the two have little in common. In the stock market knowledge, rather than luck, makes the odds.