Glossary · Defined term
Market correction
A market correction is a decline of about 10% or more from a recent peak, milder than a bear market. Definition, context, and an example.
Last updated Oct 2, 2026
What it means
A market correction is a decline of about 10% or more in a stock, index, or market from its recent peak. The 10% figure is a convention rather than a hard rule, but it is the threshold market commentators use to separate ordinary pullbacks from something more serious. A correction is milder than a bear market, which is defined by a 20% decline.
Corrections are a normal feature of market cycles, not an anomaly. They can be triggered by stretched valuations, rising interest rates, disappointing earnings, or geopolitical shocks, and they often arrive after a strong run when optimism has pushed prices ahead of fundamentals. Because they are frequent, long-term investors tend to treat them as routine turbulence.
The practical question during a correction is whether it marks a buying opportunity or the start of something worse. Corrections sometimes reverse quickly and resume the prior uptrend; other times they deepen into bear markets. No indicator reliably distinguishes the two in advance, which is why diversification and a long horizon matter more than timing.
An example
For illustration, an index peaks at 5,000 and falls to 4,450. That 11% decline crosses the conventional threshold, so headlines call it a correction rather than just a pullback.