Markets · Investing Glossary
What Is Market Correction?
A pullback of 10–20% from recent market highs.
The Full Definition
A market correction is a decline of 10% to 20% from a recent market peak. Corrections are a normal, healthy part of market cycles — they occur roughly once a year on average in the US stock market and serve as a reset from stretched valuations. They feel uncomfortable but are temporary. The difference between a correction and a bear market is magnitude: corrections are 10–20% declines; bear markets are 20%+.
Real-World Example
The S&P 500 corrected about 10–15% multiple times in the 2010–2020 bull run — in 2011, 2015–16, and 2018 — before recovering to new highs each time. Investors who sold during corrections missed the subsequent rallies.
Related Terms
Bear MarketA period of declining stock prices, typically defined as a 20%+ drop from recent highs.Bull MarketA period of rising stock prices, typically defined as a 20%+ gain from recent lows.VolatilityThe degree of price fluctuation in an asset over time.Buy the DipBuying more of an investment after its price has fallen, on the belief the decline is temporary.