The significant increase in selling pressure in a losing market or security that signals a widespread investor surrender is referred to as "Capitulation" in the world of finance. The term is derived from military strategy, where it refers to the complete and unconditional surrender of an army. In financial markets, capitulation can take several forms: panic selling, capitulative buying (or "throwing in the towel"), and liquidation of holdings.The psychological factors underlying capitulation are complex and still not fully understood. Some researchers believe that fear and loss aversion are key drivers, while others argue that herd behavior or cognitive biases play a role. Whatever its cause, capitulation is often associated with extreme investor pessimism and a belief that further declines are inevitable. This can create a self-fulfilling prophecy as more investors sell their positions, driving prices even lower.While there may be some short-term benefits to be had by betting on further price declines during periods of capitulation, this strategy is inherently risky and should only be attempted by experienced traders with deep knowledge of the markets involved.
