Market Correction

Definition

A drop from a recent market peak. For broad stock indexes, a decline of about 10% is commonly called a correction.

Market reports usually calculate the decline from a recent high in the index or asset being discussed. A correction can happen within a longer period of rising prices. The recent peak matters because a correction measures the total drawdown across days or weeks.

Example

A broad stock index drops from a recent high of 1,000 to 900. That 10% decline is commonly called a correction.