Market Correction
A market correction is a decline of at least 10% but less than 20% from a recent peak in a stock, index or other asset.
Corrections are a normal part of market cycles. They can be triggered by worries about interest rates, economic data, earnings or geopolitical events, and they often happen even within long bull markets. The word suggests prices are 'correcting' after rising too fast.
Historically, the S&P 500 has experienced a correction about once every year or two on average, although the timing is irregular. Many corrections last a few weeks or months; some deepen into a bear market if the decline reaches 20%.
Smaller drops of around 5% are usually called pullbacks. A crash refers to a very sudden, severe decline, often within days.
Example: a stock index peaks at 4,800 and falls to 4,200, a decline of 12.5%, which counts as a correction. Because corrections are common and hard to predict, many long-term investors plan for them in advance through asset allocation instead of trying to time them.