correction investment & finance definition

The movement of a stock or market to lower levels (often 10 percent or more) after the market or stock has been at unrealistically high levels. Gains from the too-high period are erased. Although a market may correct, it doesn’t necessarily mean that the long-term upward trend is broken. While the term is usually applied to falling markets, it is possible to have an upward correction that breaks a downward trend. In technical analysis, a correction is a short-term movement, either up or down, that is contrary to the dominant price trend.

However, correction often is used in a more generic sense to refer to a market that has fallen, regardless of the principles of technical analysis.