What Is Capitulation?

Capitulation is a term used to describe the surrender of an individual or group in a conflict. It can refer to either military capitulation, where one side surrenders its forces and agrees to terms set by the other side, or financial capitulation, which occurs when investors give up on trying to make money from their investments and sell off their holdings at any price. In both cases, it signals that further resistance is futile and that defeat is inevitable.

In financial markets, capitulation often marks the end of a bear market as investors who have been holding onto stocks for too long finally throw in the towel and accept losses rather than continue hoping for prices to recover. This selling pressure causes stock prices to fall even further until buyers eventually step in again at lower levels. Capitulations are also seen during bull markets when traders become overly optimistic about future prospects and buy into stocks without considering potential risks; this buying frenzy usually ends with a sharp correction as reality sets in once more.

See also  Accumulation Phase

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