What is capitulation in the stock market?

Markets Stock Markets. By Investopedia Staff. Updated Jun 25, 2019. 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.

What does capitulate mean?

1. To surrender under specified conditions: The garrison capitulated after the bombardment. 2. To give up all resistance; acquiesce: capitulate to the pressure of public opinion. See Synonyms at yield. [Medieval Latin capitulāre, capitulāt-, to draw up in chapters, from capitulum, chapter; see chapter .] ca·pit′u·lant n. ca·pit′u·la′tor n.

What is the significance of capitulation?

The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a bottom in prices and consequently a good time to buy stocks. This is because basic economic factors dictate that large sell volumes will drive prices down, while large buy volumes will drive prices up.