Correction

Definition of 'Correction'

This is a technical analysis term. When a market moves strongly in one direction and then pulls back ~ this pullback will be referred to as a correction. A correction, (which is a common occurrence in a bull (up) or bear (down) trend), is often sharper (i.e. occurs more quickly) than the preceding move. Corrections are a component of the overall trend (either up or down) and are not considered terminal to that trend (i.e. reversing it). Indeed a correction usually strengthens the foundations of the trend to carry on and sustain further gains or further losses in the days/weeks ahead.