A correction is a temporary price movement in the opposite direction to the overall trend.

    A correction can happen for various reasons such as profit-taking or countertrend traders entering the market. It is usually seen as a pullback in a trend before the price movement continues in the original direction.

    A correction is not the same as a reversal. A correction is when the market moves in the direction of the trend (1), and pulls back only for a short time (2) before continuing in the original trend direction (1).

    The following image shows a correction in an uptrend:

    Further reading

    Learn more about corrections, reversals and trends: