What is Capitulation?
A panic wave of selling that often marks a market bottom.
Formal Definition
Capitulation is the point where investors, exhausted by losses, sell en masse regardless of value, producing a sharp spike in volume and volatility. Because the last motivated sellers have exited, capitulation frequently coincides with or precedes a market bottom, and contrarians watch for it as a turning-point signal.
In Simple Terms
It is the moment of maximum fear, when frightened investors give up and dump their stocks at any price. Ironically, that surrender often marks the bottom, just before prices turn around.
Example
A 6% single-day plunge on record volume that then rebounds sharply is often described afterward as a capitulation low.