Market news relies on a specific, recurring vocabulary, and misunderstanding these terms is one of the easiest ways to overreact to a story that is describing something fairly routine. This glossary covers the terms you will encounter most often, supporting the broader goal of reading market news like a professional.
Bull Market
A bull market generally describes a sustained period of rising prices across a broad market or index, usually accompanied by broadly positive investor sentiment. There is no single universally official threshold that defines when a bull market begins or ends, but the term implies an extended trend rather than a single strong day or week.
Bear Market
A bear market describes the opposite: a sustained, significant decline in prices, commonly cited around a drop of roughly 20% or more from a recent high, typically accompanied by more cautious or negative sentiment sustained over an extended period. Like a bull market, this is a description of an extended trend rather than a single bad day.
Correction
A correction is a smaller, shorter-duration version of a decline — typically described as a drop of roughly 10% or more from a recent high, occurring over a shorter window than what would be characterized as a bear market. Corrections occur relatively often, even within longer-term uptrends, and are not automatically a signal of a broader bear market beginning.
| Term | General meaning | Typical timeframe |
|---|---|---|
| Bull market | Sustained rising prices | Extended, multi-month to multi-year |
| Bear market | Sustained decline, often 20%+ from a high | Extended, though duration varies |
| Correction | Decline, often 10%+ from a high | Shorter than a bear market |
| Rally | Rising prices | Shorter-term |
| Sell-off | Declining prices | Shorter-term |
Volatility
Volatility refers to how much and how often prices fluctuate over a given period — it describes the degree of movement, not its direction. A market can be volatile while generally trending upward, generally trending downward, or moving sideways. News coverage describing "high volatility" is commenting on the frequency and size of price swings, not necessarily forecasting which direction those swings will ultimately favor.
Rally and Sell-Off
A rally describes a period of rising prices, and a sell-off describes a period of declining prices — both terms are typically used to describe shorter-term moves rather than necessarily implying a longer-term bull or bear market has begun. Coverage of a single day's rally or sell-off is often describing routine short-term movement, not a confirmed change in the broader trend, which connects directly to separating market noise from genuine signal.
Basis Points
A basis point equals one one-hundredth of a percentage point (0.01%). This term appears frequently in coverage of interest rate changes, such as Federal Reserve announcements, because it allows for more precise description of small rate movements than rounding to whole percentage points would allow.
Why Precise Terminology Matters
Confusing a routine sell-off with the start of a bear market, or mistaking ordinary volatility for a sustained downtrend, can lead to reacting far more strongly than a given story actually warrants. Precise terminology is one of the clearest ways to calibrate your reaction to the actual scale of what is being described, whether the underlying story involves index movement or company-level earnings news.
Common Mistakes to Avoid
- Treating a single sell-off or rally as confirmation of a longer-term bear or bull market.
- Confusing volatility (degree of movement) with direction of movement.
- Assuming every "correction" headline signals a deeper decline is imminent.
- Overlooking that basis points describe very small, precise increments.
Conclusion
Precise market vocabulary exists for a reason — it lets coverage describe the scale and nature of a move accurately. Learning these terms well is one of the fastest ways to avoid overreacting to routine market news and to recognize when coverage is genuinely describing something more significant.