Glossary · Markets · Beginner-friendly
Market correction
In plain English
A market correction is a sizable drop from recent highs - often around 10%. Unpleasant, but common in long uptrends.
Everyday analogy: A steep speed bump on a highway that still goes forward overall.
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Why it matters
Corrections are normal volatility with a media label. Knowing the difference from a structural bear helps you keep a plan.
A bit more detail (optional)
Typical framing
Media often calls a ~10% drop from highs a correction and ~20% a bear market. The labels are conventions, not laws of physics.
Investor response
Corrections test whether your sizing and cash buffer match your plan. Panic selling at −12% often locks in the worst of a temporary move.
Simple examples
Routine turbulence
An index that rises for years will still print multiple 10% corrections along the way - they feel rare in the moment and normal in the history book.
Routine 10%
Long bull markets still print multiple corrections. They feel existential in the moment and ordinary in a 20-year chart.
Easy mistakes to avoid
- Selling a multi-year plan because of a ~10% drawdown
- Assuming every correction becomes a bear market
- Doubling risk mid-drop without a written rule
Remember: Corrections are common; abandoning a sound plan mid-drop is optional.