A capsule wardrobe is using your wardrobe to its maximum potential with fewer items of clothing. To do this you should have co-ordinating and complimenting colours in your wardrobe. For example; Black leggings go with your coral, your mint and your grey top, and those same tops match your navy joggers. Your navy top will be added to match your grey jeans.
Its using all your pieces to create many different outfits for many different occasions simply by changing a top or bottom or layer piece. Or even a different style shoe.
Each item is essential to you and you love every piece.