Correction
When is a weekly fall just a pause inside an uptrend, and how can you tell it apart from a reversal?
In plain words
A correction is a price decline inside a market that has been rising. The surrounding uptrend is what makes it a correction rather than simply a fall. It is usually described as a pullback of some size from a recent high.
Why it matters
Naming a fall a correction carries an assumption: that the larger trend is intact. That assumption changes how the move is sized and read. A pullback inside a rising market can be shallower and briefer than a turn in direction, but the label is only confirmed afterwards, so treating it in advance as a mere pause is a position of judgment, not a fact.
In a real week: ETH, week of 7 May 2018
In the week of 7 May 2018, ETH opened at 794.30 and closed at 729.08, a return of -8.21%, after four straight up weeks of +33.34%, +16.30%, +11.31% and +14.97%. The week's low was 633.20 at 06:00 UTC on Saturday 12 May, with a range of 26.21% and realised volatility of 117.4%. The worst day was -6.31% on Friday 11 May, followed by a +6.50% recovery on Sunday 13 May. Volume ran 1.57 times its prior 12-week average, and the market remained 37.1% below its 52-week high.
A common mistake
Assuming any fall after a run-up is a correction. The term is a description of the surrounding trend, and the same weekly drop can be a pause or the start of a reversal.