In simple linguistic terms, capitulation denotes an act of surrendering or yielding by an army or group of fighters to their adversaries. However, capitulation is used on stock markets to signify a situation when investors, fearing that stock prices will experience further drops, try to exit the market as quickly as possible in search for less risky or less volatile investments. Panic selling is an implication or indication of capitulation. When a market declines by at least 10% in one day, a capitulation is said to be in the making. This involves a largely abnormal trading activity where huge amounts of shares are dumped by their holders, dragging down the stock prices further along the way.
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