Glossary
Correction
A decline of roughly 10% to 20% from a recent high in a stock or index, shorter and shallower than a bear market.
A correction is a fall of at least 10% from a recent closing high in a stock, sector or index, stopping short of the 20% decline that is the usual line for a Bear market. The thresholds are a convention used by the financial press and analysts, not a rule set by any regulator, but they shape how a selloff is talked about.
How it is measured
Most commentators use closing prices, not intraday lows, so a market can dip more than 10% during a session and still not "officially" be in a correction.
How often they happen
Corrections are a routine part of stock market history. The S&P 500 has had many more 10% declines than bear markets, and a large share of corrections recover their losses within months rather than years. A close call was late 2018: the index fell about 19.8% from its September high to its December 24 close, just shy of a bear market, and regained the September level by April 2019.
What to keep in mind
The label tells you how far prices have fallen, not where they will go next. Every bear market starts as a correction, and nobody can know in advance which declines will stop at 12% and which will run to 35%. For individual stocks, 10% swings are common enough that the term carries less meaning. A related idea is a Pullback, usually used for smaller dips of around 5% within an Uptrend.