A market correction is decline of at least 10% of market stock, bond, commodity or market index from its highest index point. Market corrections are generally temporary and typically end with the price of a stock or bond “bottoms up” and investors start to buy again. Investors sometimes confuse corrections with bear markets, which occurs with drops of 20% or more. Although a market correction can be a forerunner of to bear market or recession, its not always the case the market face. A market correction occurred 22 times in 1974 and four of those corrections led to bear market. The Stock Dork is a stock market platform which works on a mission to teach the investors both the ins and outs of investing in stock and make the investors into money makers.

 A general perspective view exists that market corrections are bad, but in reality they are backbones for a healthy stock market. A market correction regularizes opportunities for the market to digest recent gains and for investors to develop a better understanding of hoe comfortable they are with the market risk and potentially add stocks to their portfolios at very discounted prices.

What triggers a market correction?

   Several factors that trigger the market corrections are classified as follows:

• Profit Selling
• Technical Analysis
• Corporate Earnings
• Fear

Profit Selling:

• Investors choose to sell their stocks to realize the profit after there is a sustainable hike in the stock market.
• If the volume of the stocks is traded for a higher rate, then it could trigger a correction.

     Technical Analysis:  

• Stock market analyst’s aims to predict the future price movements based on past stock exchange trading patterns.

• The analysis indicated that the group of stocks or the market as a whole is in a pattern that has promoted the correction in the past, investors choose to sell their stocks in the future.

•  If enough investors try to do this, then market correction tends to occur.

Corporate Earnings:

• The stock market follows corporate earnings. When a corporate earnings are projected to rise, its stock price also increase as well typically.
• On the other hand, if there is a drop in the corporate earnings then stock price also tends to drop simultaneously.
• An individual corporation’s performance does not impact much in the market, but a downturn in the globally economic outlook will affect negatively the corporate earnings and in turn their stock prices prompting the market correction due to sell- off groups of stocks.

Fear:

•   Sense of fear based on a negative event happened in the corporate is in the news  or about the economy will trigger to a sell- off and in turn, a market correction will occur.

What does market correction mean for investors?

     In the event of stock market correction, don’t panic just stay calm is the best thing to be done. Don’t let your emotions overrule yourself and convince you to do the opposite. Don’t let temporary market condition derail the long-term investment plan.