In Chemistry, a catalyst is defined as:
“A substance that increases the rate of a chemical reaction without itself undergoing any permanent chemical change.”
Whilst in physics, Issac Newton’s 3rd of law of motion states that:
“For every action, there is an equal and opposite reaction”
It may not be obvious that either of the items above has a role to play in trading, but believe me, they do.
Catalysts (for change) have an extremely important role to play in the lifecycle of trade and its eventual outcome.
As does the idea of equal and opposite actions and reactions, in the way that securities prices behave.
I believe that a successful trade is made up of a combination of two things;
An attractive setup and an appropriate catalyst.
The catalyst is the driver for change in price performance, in just the same way that a catalyst drives a chemical reaction in a laboratory.
Let’s take a look at this in action in AMD US, Advanced Micro Devices, a CPU and graphics chip maker
AMD has played second fiddle to Intel INTC US for years and, more recently, to Nvidia, though AMD has now launched its own range of AI chips to try and counter that.
AMD’s stock price fell from $227.0 per share to just over $75.0 between May 2024 and June 2025, largely because it had no answer to Nvidia's AI dominance, and despite Intel losing its way, AMD had not attained a leading position in the supply of PC and laptop CPUs.
It was effectively fighting battles on two fronts, and losing both, at least in the minds of traders.
Mind you, there was no lack of interest in the stock, for example, in one of the trending discords I contribute to, there are no less than 540 comments and conversations about AMD, many of which took place in the last 12 months.
Source: Barchart.com
The expectation was for the stock to “turnaround”, but it just didn't, or wouldn't happen.
Until it did
Slowly but surely, the price bottomed and then began to edge higher until on June 16th the 10-period MA line crossed up through the slower-moving 50-period line (see the red box in the chart above) and in doing so it signalled rising price momentum, the stock hasn’t looked back since.
I often say that sentiment changes on the margins.
To exemplify what I mean. Imagine a set of old-fashioned weighing scales in balance, with say 50 grams on each side of the balance bar. If you move just one gram of weight from left to right, or right to left, you create an imbalance, and the balancing bar will shift accordingly.
If you add further weight to one side of the scales, the imbalance will become greater still.
Now imagine that instead of metal weights, it's trader sentiment that’s being measured.
Sentiment fluctuates between extremely bearish and extremely bullish and swings from one to the other, just like the sine wave in the image below, which alternates between high and low values over time.
The upswing in trader sentiment towards AMD coincided with the uptick in the AMD stock price, as one improved, so did the other, and both gathered momentum, as one effectively fed into the other, boosted by broker comments and positive news flow about and from AMD.
AMD have added as much as + 68.00% to their stock price over the last two months, highlighting just how powerful the combination can be.
Outside of earnings season, it's not always easy to know what the catalyst that drives price and or sentiment change will be.
The fact that we don't know shouldn’t stop us from using the “power of what-if thinking “,
Markets being what they are, a good trade set-up is often the precursor to the manifestation of a catalyst.
The news or comment doesn't have to dramatically affect the underlying business; it just has to generate enough interest among traders to tilt the balance of sentiment in your favour.
And as I noted before, a marginal swing in sentiment can be enough to set the ball rolling, create a new trend in the price action, taking the price through support and resistance levels, trend lines, and or moving averages.
I also like to watch for new highs and lows and higher volumes, which are all signs of increased interest and activity in a stock
We can see the trend in volumes traded in AMD US over the last 3-months in the chart below. The overall trend is higher, with significant spikes in volume along the way
Source: Darren Sinden/Barchart.com
Here we see the daily volume traded in AMD US vs the percentage price change in the stock, the bubbles in the top right quadrant represent days with high volumes and large price moves, and we can see that there was only one occasion where we saw a +5.00% price rise on volume of less than 60 million shares.
Source: Darren Sinden/Barchart.com
It's not conclusive proof as it's just one example, but it's certainly suggestive of the idea that large price moves are usually accompanied by high volume.
Price moves and volume that are a reaction to a change in sentiment, which was itself powered by the appearance of a catalyst for the stock.
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.
All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk. Forecasts are not guarantees. Rates may change. Political risk is unpredictable. Central bank actions may vary. Platforms’ tools do not guarantee success.