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Corrections in Stock Markets

1. Introduction to Market Corrections.

A market correction is a temporary decline in stock prices, usually by 10% or more from recent
highs, before stabilizing or recovering.
Corrections remove excess speculation and adjust valuations.

2. Causes of Market Corrections

– Economic factors (inflation, interest rates)
– Market sentiment & overvaluation
– Geopolitical events
– Company-specific risks

3. How to Identify a Market Correction?

– Breakdown below moving averages (50, 200 EMA)
– RSI dropping below 40
– Increasing selling volume
– VIX (Volatility Index) rising above 25.

4. Managing Investments During a Correction.

– Reduce exposure to high-risk stocks
– Use stop-loss orders
– Diversify portfolio
– Invest in gold & bonds
– Buy quality stocks at lower prices.

5. Common Mistakes Traders Make.

– Panic selling
– Catching falling knives
– Ignoring risk management
– Overleveraging

6. Historical Market Corrections & Recovery.

– Dot-Com Bubble (2000-2002)
– 2008 Financial Crisis
– COVID-19 Crash (2020).

7. Conclusion ? Key Takeaways.

– Corrections are normal and necessary.
– They offer both risks and opportunities.
– Smart investors use corrections wisely.

Disclaimer:

This content is for educational purposes only and does not constitute financial advice.
GlobalTradeView is not SEBI registered.