In trading, a market correction is when the price of a financial instrument declines from 10% to 20% of its highest recent price. In finance, market corrections can also be known as technical corrections. Market corrections occur when the price of an asset becomes overinflated from its actual average value, unexpectedly causing investors to sell it off. Market corrections can happen for the price of any asset type traded, such as stocks, indices, or foreign exchange markets as examples. The timeline of a market correction can vary, with the shortest being days and the longest typically for 3 to 4 months.
