Daily Gains Letter

Stock Market Correction

A correction in the stock market references a period when stock prices decline during an uptrend. Corrections are very normal and occur because investors tend to take profits of the table as the asset prices increase – short term selling, and reducing risk. Note that stock market correction shouldn’t be used as a bear market. In bear market the prices continue to decrease. In correction the prices finds a support at some level (at the previous high in a perfect situation) and continue its course to go higher from there. If the stock market correction results in making of lower lows and lower highs, the trend of the market might reverse and it may head lower.