Capitulation

Capitulation is the point in a decline where holders who were hanging on finally give up and sell, often all at once. It tends to happen after a stock or the market has already fallen a lot and fear has built up.

The word comes from a military surrender: the sellers are "giving up the fight" of holding on, not choosing a good exit, just wanting out.

A capitulation day often shows unusually heavy trading volume, several times the recent average, combined with a sharp price drop. Sometimes the session prints a long lower wick, meaning the price fell hard intraday and then recovered some of the loss before the close.

Options and volatility markets can reflect it too: implied volatility and indexes like the VIX often spike on these days, since demand for protection jumps along with the fear.

Sometimes. A capitulation day is one of the classic signs traders look for near the end of a decline, because once the last reluctant sellers are out, there may be fewer people left to sell.

It is not reliable on its own, though. Some declines see more than one capitulation-looking day before the actual bottom, and a sharp volume spike can also just be a pause in a longer downtrend rather than its end. It is one clue traders weigh alongside others, not a signal by itself.

Most down days are not capitulation. What sets it apart is the combination of an already-extended decline, a clear jump in volume, and visible panic, not just red candles. A single bad day early in a downtrend is usually just a sell-off.