#Investor'sVocabulary: Correction

Recently, we have discussed the concept of "trends" and their impact on the decisions of professional investors. To distinguish a market trend change from a temporary fluctuation in the value of securities, you should get acquainted with the term "correction".

A correction or pullback is a temporary deviation of quotes from the main trend line upward or downward. If you've invested in stocks that consistently show an upward trend, but then suddenly fall in price by more than 10 %, do not rush to panic. It is quite possible that this is not a trend change, but a simple market correction.

A pullback often happens due to overbought or oversold stocks. Investors begin to take profit on a massive scale, closing positions, which leads to a reversal of quotes. Sometimes a correction can be triggered by the release of a company's financial report or statements from top managers.

An upward correction is a sudden increase in prices during a downward trend.

A downward correction is a decrease in the value of securities against an upward trend.

When the pullback process is completed, prices start moving again in accordance with the main trend.

How do you distinguish a trend change from a simple correction? There is no clear answer to this question. Professional investors are helped by their deep knowledge of the market and awareness of the latest financial news. We have already written about where the world's leading financiers get information. Make use of this! (/news/posts/informaciya-na-sluzbe-uspesnogo-investora-1239)