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Catalysts
Catalyst
Definition
A specific event or news that changes how the market values a stock, causing a significant price movement.
Why It Matters
Without a catalyst, stocks drift. With a catalyst, stocks move. The best small cap trades are built around identifiable catalysts — FDA approvals, contract wins, earnings surprises. Learning to identify catalysts is the core skill of momentum trading.
Real Example
A biotech company announces Phase 3 trial results. If positive, the stock might jump 50-200%. If negative, it might drop 50-80%. The trial result is the catalyst — it fundamentally changes the company's valuation.