A correction is a reverse movement of at least 10% in the price of a stock, bond, commodity, or index. It is usually a decline to adjust for an overvaluation of the asset.
 | | Correction | In the world of investments, a correction is generally defined as a decline of 10% or greater in the price of a security from its most recent peak. Corrections can happen anywhere including individual stocks, the indexes that follow stocks or sectors, the commodities and currency markets, or any asset that trades on an exchange.
An asset, index, or market may fall into a correction either briefly or for sustained periods—days, weeks, months, or even longer. However, the average market correction is short-lived and lasts anywhere between three and four months.
Investors, traders, and analyst use charting methods to predict and track corrections. Many factors can trigger a correction. From a large-scale macroeconomic shift to problems in a single company's management plan, the reasons behind a correction are as varied as the stocks, indexes, or markets they affect. | | Read More » | | Sell-Off | | A sell-off is a rapid selling of securities, such as stocks and bonds, which leads to a decline in their price. | | Read More » | | | Bear Market | | A bear market is a market where securities prices fall and widespread pessimism causes a negative sentiment to be self-sustaining. | | Read More » | | | Dead Cat Bounce | | A dead cat bounce is a temporary recovery from a prolonged decline or a bear market that is followed by the continuation of the downtrend. | | Read More » | | | Valuation | | A valuation is defined as the process of determining the current worth of an asset or company. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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