What Is Correction? Meaning & Example
Definition
A correction is a decline of roughly 10% to 20% from a recent peak. Corrections are a normal part of market cycles and happen fairly often.
Related terms
A bear market is a period of falling prices, commonly defined as a decline of 20% or more from a recent high. It often comes with pessimism and fear.
VolatilityVolatility measures how much and how quickly prices move. Higher volatility means bigger swings, which bring both more opportunity and more risk.
DrawdownA drawdown is the decline from a portfolio's or asset's peak value to a later low. Maximum drawdown shows the worst peak-to-trough drop over a period.
What is Correction?
A correction is a decline of roughly 10% to 20% from a recent peak. Corrections are a normal part of market cycles and happen fairly often.
Can you give an example of Correction?
A stock index falling 12% over a few weeks before stabilizing would be called a correction.