The term capitulation is synonymous with surrender or defeat, usually a military defeat. In the forex market, capitulation refers to surrendering any previous gains in a position and closing it to get out. Capitulation usually refers to a situation where many traders close their positions in the same trading session, giving further strength to a prevailing trend.
True capitulation involves extremely high volume and sharp movements, which are indicative of many traders closing positions simultaneously. As the market is battleground of competing traders, capitulation signals a win for either the shorts or the longs in a particular currency pair.
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