Capitulation refers to a period of strong selling activity, where investors give up their positions and sell their holdings as quickly as possible. Let's take a closer look.
What is Capitulation?
When investors or traders liquidate their existing long stock positions amid an extended stock price downturn, this is referred to as capitalization. You could think of it as the point at which traders or investors give up on their long positions and accept losses.
What Causes Capitulation?
Capitulation typically occurs during a period of continual stock price downtrend, which can be caused by fear, uncertainty, and doubt (“FUD”), such as:
- A bear market
- Poor earnings results
- Negative company or market headlines
Capitulation in a stock can often be identified by heavy selling volume and a sharp drop in price following an extended period of a stock price decline.
What is Capitulation? What Causes Capitulation? - Hopefully, this article can help you to get some knowledge.
