Stock market basics · updated October 21, 2026
What is a stock market correction
A correction is a fall of 10-20% in a stock or an index from its most recent peak. It is smaller than a bear market and happens often, even in good years.
How it works
Analysts measure the drop from the highest recent closing price. Between 10% and 20% is a correction; more than 20% is a bear market. On the US stock market, corrections of more than 10% have historically come about once every one or two years, and many were made up within a few months.
Worked example
An index reaches 5,000 points, then slips to 4,400.
The drop is 600 points, or 12%: a correction, not a bear market.
How to read a correction
Corrections are part of how the stock market normally works. Anyone who owns stocks should expect several of them in a decade.
When a correction can fool you
A correction can turn into a crash: at the start you do not know where it stops. Individual stocks usually fall more than the index.
Related terms
Learn it in the Academy
Questions about a correction
How often do corrections happen?
On the US market, historically about once every one or two years. Most did not turn into bear markets.
Is a correction a good time to buy?
For long-term investors, lower prices are usually an opportunity, but nobody knows whether the drop is over.
These explanations are for information only. They are not a recommendation to buy or sell.
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