A catalyst in trading refers to an event or piece of information that triggers a significant price movement in a security or the broader market. Examples include earnings reports, economic data releases, regulatory changes, or geopolitical events. Identifying upcoming catalysts is a key part of trade planning, as they often create the volatility and directional moves that active traders rely on for profit.
Example
“The FDA approval acted as a catalyst for the biotech stock, sending shares up 45% in a single session.”