What Is a Correction?

A correction is a change in the price of an asset, usually stocks or bonds, that reverses the direction of its previous trend. Corrections are typically seen as short-term movements and can be caused by a variety of factors such as economic news, company earnings reports, political events or even technical analysis. Corrections often occur after periods of strong gains in stock prices and can lead to significant losses for investors who have not taken steps to protect their investments.

Corrections are generally considered healthy for markets because they help prevent bubbles from forming and allow investors to take profits off the table before prices become too high. They also provide opportunities for new buyers to enter at lower levels than would otherwise be possible if there were no corrections taking place. While corrections may cause some short-term pain for investors, they ultimately create more efficient markets with better pricing structures over time which benefits everyone involved in trading securities.

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