In simple terms
In general trading language, a shakeout is a quick move that forces many participants to exit — through stops, fear, or risk reduction — and is then followed by a recovery. The market appears to “shake out” traders who cannot maintain their positions.
The term describes an observed effect. It does not identify who caused the move or allow traders to be classified as “strong” or “weak” from price data alone.
In the Wyckoff method
In Wyckoff analysis, shakeout has a more precise meaning. It may describe a move below trading-range support followed by a quick return, often connected with a phase-C spring in accumulation. The prior range, structure, and later tests matter more than an isolated spike.
Modern usage can overlap with stop hunt or liquidity grab, but those terms emphasize orders and liquidity; shakeout emphasizes forced exits and recovery.
Limit
Not every correction that triggers stops is a shakeout, and recovery does not guarantee that the prior trend will resume. Without context, the term remains a retrospective description.
Sources
- Wyckoff Analytics, The Wyckoff Method — places springs and tests in accumulation phase C and also shows the no-spring variant.
- StockCharts ChartSchool, The Wyckoff Method: A Tutorial — distinguishes springs, terminal shakeouts, later tests, and confirmation through a sign of strength.