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A stock market correction is commonly understood as a drop of about 10% from a recent high. A bear market is a deeper, longer decline: the SEC’s Investor.gov glossary says it generally occurs when a broad market index falls by 20% or more over at least two months. Neither label is a trading halt or, on its own, an instruction to buy or sell.
What is a stock market correction?
In common financial-market usage, a correction is a decline of roughly 10% from a recent peak. The term describes a pullback in prices; it is not a formal SEC threshold. The SEC’s Investor.gov glossary does not define “correction” in the sources cited here, so the 10% figure should be treated as a convention rather than a regulator’s rule.
The reference point matters: the decline is measured from a recent high, not from an investor’s purchase price. Usage can vary, and the label does not prescribe what an investor should do.
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The SEC’s Investor.gov glossary says: “Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period.” The word “generally” makes this a broad description, not an exhaustive rule for every market or index. The time qualifier matters: the SEC wording includes both the 20% decline and a period of at least two months.
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Investor.gov describes a bull market in parallel terms: a broad market index rising by 20% or more over at least two months. These are general labels for market conditions, not precise signals about what will happen next.
Correction vs. bear market
| Feature | Correction | Bear market |
| Typical threshold | About a 10% decline from a recent high, in common usage; not an SEC definition. | 20% or more down, generally, according to the SEC’s Investor.gov glossary. |
| Reference | A recent market peak; the convention is not tied to one specified index. | A broad market index, in the SEC description. |
| Duration qualifier | No fixed duration is part of the common 10% convention. | At least two months in the SEC’s general description. |
| What the term describes | A market-price decline. | A period of falling prices and pessimistic market sentiment. |
A correction can deepen into a bear market if the decline reaches the bear-market convention and persists for the stated period. The terms are not interchangeable: the correction convention uses a smaller approximate decline, while the SEC’s bear-market description adds a duration condition.
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Is a correction the same as a market crash or trading halt?
No. “Correction” and “bear market” describe market declines. A market-wide circuit breaker is instead a trading mechanism that temporarily halts trading after a specified single-day drop in the S&P 500. Investor.gov lists these triggers:
- Level 1: a 7% single-day decline.
- Level 2: a 13% single-day decline.
- Level 3: a 20% single-day decline.
Investor.gov says a Level 1 or Level 2 trigger before 3:25 p.m. results in a 15-minute halt; a Level 3 trigger stops trading for the rest of that trading day. These thresholds are not correction or bear-market definitions. Because market procedures can change, consult the current Investor.gov explanation for operational details.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What should investors do with these labels?
Use the labels to describe market conditions, not as stand-alone trading signals. Whether a decline affects an individual portfolio depends on its holdings, time horizon, financial needs, and tolerance for risk; the label alone does not determine whether to buy or sell.
For context, index funds aim to track a market index, but they do not make the index itself directly investable. The SEC notes that index funds still involve fees, tracking error, and investment risk. A market downturn does not remove those considerations or make a particular fund suitable by default.
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