InsiderFlow › Glossary › What is a market correction?

What is a market correction?

A correction is a 10–20% decline from the highs: painful but physiological, occurring about once a year on average.

Below 10% it's a mere dip, beyond 20% a bear market: the correction sits in between. It's the mechanism by which the market deflates excesses without changing its underlying direction: most corrections never become bear markets.

For patient investors, corrections have historically been opportunities: buying 15% below the highs has almost always paid off over 3–5 year horizons. The hard part is doing it while headlines scream collapse.

Concrete example

The S&P 500 has gone through dozens of corrections since 1980, roughly one per year: nearly all forgotten within twelve months.

How you see it in InsiderFlow

On InsiderFlow these concepts come alive on real data: what big funds and insiders are buying, explained every day.

Frequently asked questions

How do you tell a correction from an incoming bear market?

In real time you can't: only hindsight assigns the labels.

Should you sell during a correction?

Historically no: rebounds arrive without warning, and missing the best 10 days halves long-term returns.