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 20% or more over at least two months. These are market descriptions, not instructions to buy or sell.
How a correction differs from a bear market
The main difference is the size and duration of the decline. The correction threshold is a common market convention; the SEC’s general bear-market description includes both a 20% threshold and a duration of at least two months.
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| Term | Common or official description | Reference and duration |
|---|---|---|
| Correction | A decline of roughly 10% from a recent high is commonly called a correction. This is common market usage, not an SEC rule. | Measured from a recent high; no duration requirement is established here. |
| Bear market | The SEC says a bear market generally occurs when a broad market index falls by 20% or more over at least a two-month period. | Uses a broad market index and an explicit duration qualifier. SEC Investor.gov glossary |
The SEC’s use of “generally” matters: this is a regulator-published description of a common convention, not a rule that every market participant applies identically to every index.
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The roughly 10% figure helps describe the size of a pullback from a recent peak. It does not, by itself, establish how long the decline will last or whether prices will fall further. The sources cited here do not establish a standard correction duration, frequency, or recovery time.
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Likewise, crossing a threshold does not settle what an investor should do. A market label alone is not a reason to buy or sell; decisions depend on an investor’s goals, time horizon, and circumstances.
A correction or bear market is not a trading halt
Market-wide circuit breakers are a separate mechanism. Investor.gov describes triggers based on single-day declines in the S&P 500: 7% for Level 1, 13% for Level 2, and 20% for Level 3. They are not correction or bear-market definitions.
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- If a Level 1 or Level 2 trigger occurs before 3:25 p.m., trading halts for 15 minutes.
- A Level 3 trigger halts trading for the rest of that trading day.
These thresholds and halt procedures are operational rules and may change. See Investor.gov’s circuit-breaker explanation for the current description.
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For contrast, the SEC says a bull market generally occurs when a broad market index rises by 20% or more over at least two months. That is a general convention, not the inverse of a circuit-breaker rule. SEC Investor.gov’s bull-market glossary entry uses the same duration framing as its bear-market description.
“Market crash” is often used informally for a sharp, severe decline, but it is not the same defined threshold as a correction or bear market in the sources cited here. A sudden single-day fall may also implicate circuit breakers, but the terms describe different things: market conditions versus a trading mechanism.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Does a market downturn mean you should buy an index fund?
No. A correction or bear-market label is not a fund recommendation. Index funds seek to track an index; they cannot make the index itself directly investable, and they carry fees, tracking error, and investment risk. The SEC’s investor education page explains these features and risks: Index funds.
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