What is capitulation & how does it work?

Simply defined, capitulation occurs when a significant amount of long positions are abandoned, creating a sharp period of selling and price decline. Capitulation is actually a very intuitive concept, especially when one considers the emotional aspects of capital market trading.

Where does the word capitulation come from?

The word comes from the Latin capitulāre, with a root in capital, or "the head of state." You can use capitulation for any act of surrender. If you're stuck in an endless argument with your neighbor over the exact boundary between your properties, only the original deeds to the land will bring about a capitulation.

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.