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A drop of 10% or more from a recent high, smaller than a bear market.
A correction is a fall of 10% to 20% from a recent high. It is smaller than a bear market and often happens when prices have risen quickly. Corrections can be short and are common in healthy markets.
If an index peaks at 5,000 points and drops to 4,400, it has fallen 12%: a correction.
Corrections happen roughly every year or two on average. They are a reminder that prices don't rise in a straight line, and can be buying opportunities for long-term investors.
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