A rapid and significant decline in asset prices, often leading to capitulation and a subsequent recovery.
A washout refers to a period of intense selling pressure that drives an asset's price down sharply, often forcing weaker holders to liquidate their positions. This event can cleanse the market of speculative excess and create conditions for a sustained recovery. Typically, washouts are characterized by high trading volumes and a rapid reversal of previous trends, signaling a potential shift in market sentiment and a reset of asset valuations.