🤔 What is Capitulation? #Learning

Capitulation refers to a period of strong selling activity, where investors give up their positions and sell their holdings as quickly as possible. It is often referred to as panic selling because during a period of capitulation, sell orders peak at a much higher-than-average level, which quickly drives the asset price lower and lower until a bottom is eventually reached.

Capitulation can be described as the moment when investors lose hope - accepting losses and giving up their previous gains. When the panic selling period is over, marking the end of the capitulation, it may be followed by either a consolidating period (sideways price movements) or by an upward trend that would potentially indicate the beginning of a bull market.

The reason why capitulation periods often lead to price reversal and strong upward trends is that these episodes are usually marked by FUD and panic, so the selling pressure goes beyond normal levels, reaching oversold conditions. The more violent and abrupt the price drop is, the higher is the chance that it will be followed by a strong bounce

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