A short-term decline in asset prices designed to eliminate less committed investors, allowing stronger holders to acquire positions at lower levels.
A shakeout in financial markets is a deliberate or natural event that causes a temporary but sharp decline in asset prices. The primary purpose is to purge weaker investors or traders who may be holding positions with low conviction. This allows more stable or informed participants to accumulate assets at a reduced price before a potential recovery or continuation of an upward trend.