What is Market Correction?
A market correction is a decline of 10% to 19.9% from a recent peak in the price of a security or market index. Corrections are normal, healthy events that occur regularly even within bull markets.
Market Correction Explained
Corrections are not crashes — they are a natural part of market cycles. Historically, the S&P 500 experiences a 5% correction about three times per year and a 10% correction about once per year. They shake out weak hands and reset overbought conditions. Panic selling during corrections is one of the most common mistakes retail traders make.
Real-World Example
After a strong six-month rally, the S&P 500 drops 12% over four weeks. Investors who sell at the bottom lock in losses. Those who recognize this as a normal correction and hold (or buy more) typically see the market recover and reach new highs within a few months.
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