Search Investopedia

Capitulation

Filed Under » ,
Dictionary Says

Definition of 'Capitulation'

When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.

The term is a derived from a military term which refers to surrender.
Investopedia Says

Investopedia explains 'Capitulation'

After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom.

Related Definitions

  •

    Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear ...
    Read More »

  • Bloodletting

    A period marked by severe investing losses. Bloodletting may occur during a bear market, in which the value of securities in many sectors may decline rapidly and heavily.It is named ...
    Read More »

  • Bottom

    The lowest point or price reached by a financial security, commodity, index or economic cycle in a given time period. A specific time span is usually used to determine a bottom - most ...
    Read More »

    • Correction

      A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or ...
      Read More »

    • Dead Cat Bounce

      A temporary recovery from a prolonged decline or bear market, after which the market continues to fall.
      Read More »

    • Falling Knife

      A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose ...
      Read More »

    • Flight To Quality

      The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or ...
      Read More »

    • Panic Selling

      Wide-scale selling of an investment, causing a sharp decline in price. In most instances of panic selling, investors just want to get out of the investment, with little regard for the ...
      Read More »

    • Recession

      A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The ...
      Read More »

    • Torpedo Stock

      A stock that has fallen substantially in value and that looks like it will continue to fall in value in the foreseeable future. This name refers to this type of stock's similarity to a ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions