Correction

A decline within a larger upward move, understood as an interruption rather than a reversal. The threshold most often quoted, a fall of about a tenth from a recent peak, is a convention that grew up around equity indices in financial journalism. It has no statistical basis, no regulator defines it, and a fall of roughly a fifth is by the same convention called a bear market.

Measurement is less settled than the label suggests. A decline can be measured on closing prices or on intraday extremes, and the two produce different dates and different depths for the same episode. The peak it is measured from is also chosen after the fact, which is why two commentators can date the same correction differently.

The unavoidable problem is that a correction and the beginning of a much larger decline look identical while either is happening. The word contains a claim about the future, that the larger move will resume, and that claim can only be verified afterwards. This is why careful writing describes a decline by its depth and its dates rather than by the name, and why practitioners disagree about whether the term carries any information at all beyond the arithmetic.