A temporary change of direction in a market trend where stock prices abruptly drop, losing their gains in a bull market, or abruptly rise, recovering some of their lost ground in a bear market. For example, a correction might be a price decline during a bull market to an extent exceeding 5%-10% (of the distance from the beginning of the most recent trend). During a bull market, a number of corrections of 5% to 10% can occur. Sometimes, the correction’s magnitude can reach 15%. After every correction, the market reverses direction and resumes its previous trend.

It is a secondary market trend that constitutes a brief fall of stock prices followed by a period of rising prices. Like a bear market, a correction is a downward price movement, though of a smaller scale. A correction is necessary for the stability of securities, as it brings overbought and overpriced securities back to their actual values.