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.
 | | Term of the Day | Words to Know | | |  | | Correction | In investing, a correction is a decline of 10% or more in the price of a security from its most recent peak. Corrections can happen to individual assets, like an individual stock or bond, or to an index measuring a group of assets.
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 » | | | Dead Cat Bounce | | A dead cat bounce is a temporary recovery of asset prices from a prolonged decline or a bear market that is followed by the continuation of the downtrend. | | Read More » | | | Technical Correction | | A technical correction is a decrease in the market price of a stock, or index, that is greater than 10%, but lower than 20%, from the recent highs. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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