Market leading to another drop in price and

 

Market
Corrections

 

            There are market corrections and market technical
corrections. A normal market correction, defined by Investopedia is “a reverse
movement, usually negative, of at least 10% in a stock, bond, commodity or
index to adjust for an overvaluation” (Correction,” n.d.). These usually happen
at least once a year when the market is beginning to show a trend of closing
lower. It is hard to tell if this is good or bad for just one stock, this depends
on how people handle it. Essentials for people will always tend to stay high
regardless of corrections. The stock could stay the same as the rest of the
market and begin to rise back up in price at the same pace as everything else.
The other thing that could happen is when there is a correction and people
begin to panic and sell, leading to another drop in price and more people
selling. A correction is usually an appropriate time to buy good stocks at
cheaper prices which makes prices go up even more. Corrections are normally a
good thing in the long run, if you don’t panic.

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            Technical corrections, also defined by Investopedia (n.d.),
is when “A decrease in the market
price of an asset or entire market after extensive price increases.”
This happens when the stock prices are high enough that people must be careful
about spending so much money. The slow in purchases will then drop the price.

            In stocks, there are always three options: buy, sell, or
hold. This does not change if the market is in a correction. You can sell and
lose money, hold and not lose or gain, or buy more and take a risk. If I had
investments experiencing a correction I would remain calm. It is almost never a
promising idea to sell during a correction as it would be hard to make the
money back elsewhere. It might be scary the first few times as you would think
you lost money but if you are patient then good things will happen. There are
not many other reasons why you should sell. You are guaranteed a drop in price
if you sell right away in a correction, but if you hold onto everything then
they have a chance to rise in price again. If you are confident in the market
and the advice you are receiving, you could invest more when prices are low. My
choice is to hold my stocks in a correction.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

Correction. (n.d.).
Investopedia. Retrieved 25
January 2018, from https://www.investopedia.com/terms/c/correction.asp

 

Technical Correction. (n.d.). Investopedia. Retrieved 25
January 2018, from https://www.investopedia.com/terms/t/technical_correction.asp