Capitulation is when investors give up any previous gains in a security or securities by selling as prices fall.
 | | Term of the Day | Words to Know | | |  | | Capitulation | Capitulation is when investors give up any previous gains in any security or market by selling their positions during periods of declines. Capitulation can happen at any time, but typically happens during high volume trading and extended declines for securities. A market correction or bear market often leads investors to capitulate or panic sell. The term is a derived from a military term which refers to surrender.
After capitulation selling, many traders think there are bargain buying opportunities. The belief is that everyone who wants to sell a stock for any reason, including forced selling due to margin calls, has already sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that capitulation is the sign of a bottom.
While traders often attempt to anticipate capitulation selling or buying, the reality is that capitulations are after-the-fact outcomes that result from the maximum psychological and financial pain that can be endured by investors before liquidating their positions. | | Read More » | | Related to "Capitulation" | | | | What is market capitulation? | | By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point in time when investors have decided to give up on trying to recapture lost gains as a result of falling stock prices. | | Read More » | | | SPONSORED BY INVESCO | | The Complete Guide to ETFs | | ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. | | Learn More » | | | Margin Call | | A margin call is a broker's demand of an investor who is using margin to deposit additional money so that the margin account is brought up to the maintenance margin requirement. | | Read More » | | | Realized Loss | | Realized loss occurs when an asset which was purchased at a level referred to as cost or book value is then disbursed for a value below its book value. | | Read More » | | | Bottom | | A bottom is the lowest price reached by a financial security, commodity, index or economic cycle. | | Read More » | | | Bear Market | | A bear market is a market where securities prices fall and widespread pessimism causes a negative sentiment to be self-sustaining. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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