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What is Stock Catalyst?
A Stock Catalyst is information of any sort that can cause a stock's price to rise or fall often significantly. That can be events, or news about the company, its fulfillment, the industry or sector, or even the world. Stock catalysts are influential by means of their capability to affect the investor sentiment, sometime in no time at all. Also they generally apt to mark the beginning or end of stock trends.
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The most common catalysts are triggered by unexpected information that emerges on the market, in the economy or globally in the world. In aspect of market performance forecast, the stock market may re-consider a company's business prospects after catalyst arose. Stock Catalysts are not alike, some of them are stronger than others, and even the most sublime catalysts may or may not always work.
Stock Catalysts, (especially news) are commonly involved in Day Trading Strategies. Intraday Traders use Catalysts as short-term trading strategy to capitalize sudden price actions tripped by a Stock Catalyst, often stock market news or stock news (ticker news) about a particular company.
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Though it's roughly simplified, in condensed manner, bad news usually unnerves the participants of stock market whereas good news attracts investors' attention again toward the world of stocks again. This is why news and Stock Catalysts in general have the power to move stock prices impressively, and they come into play when Day Trading is the name of the game. The key to successful utilization of Stock Catalysts, is having an efficient trading strategy in which news or other types of catalyst are implemented seamlessly. It is of paramount importance to identify, that Catalysts will or will not work well with your trading strategy. Intraday Stock Picking Strategies that rely on Stock Catalysts need to keep track of three major factors as,
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volume
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volatility
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momentum.
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Walking hand in hand they can create a trend. A considerable increase in trading volume may be proof that the Stock Catalyst will form a trend, and the Stock Catalyst plays in your favor. A significant price move alone implies no warranty that there is ample volume. You don't want to buy a stock if it does not have a lot of buyers that might end up in trend turn.
An aggressive price swing due to a Stock Catalyst causes the volatility increase, however without momentum, price may fail to rise further accordingly despite of the Catalyst you shouldn't enter long position. Stock Catalysts are categorized as hard and soft. A hard Catalyst is one that affects a company primarily such as insider transactions, earnings, dividend payout, change in leadership, merger or acquisition or SEC investigation.
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Reversely a soft Catalyst is a Catalyst that is not associated with a company directly but one that can lead to price moves either to the down- or the upside. Though the concept for harnessing Stock Catalysts' power is simple as an egg, Day Traders have to vigilant to avoid stocks overvalued by means of their news 105 or other type of Stock Catalysts, and reduce the exposure of potential risk if volume and momentum abate sooner than price action would reach the apex.
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STOCK CATALYST
SOFT AND HARD STOCK CATALYSTS
