Flat

The term "flat" has two meanings in trading. The first and most common is "being flat": a trader is flat when they have no open positions in their trading account – neither long nor short. The second meaning refers to an underlying asset, such as a share, whose price has been moving around the same level for a longer period without any significant moves up or down.

Being flat

A trader becomes flat by closing all open positions. From then on, price movements no longer affect the account. Many day traders make it a rule to be flat at the end of every trading day, so that they are not exposed to overnight risks such as price gaps – or, in forex and CFD trading, to financing costs for positions held overnight. Others go flat ahead of important economic data or central bank decisions, or after a series of losses to take a break and review their trading.

Example: a trader holds a long position in EUR/USD and a short position in a stock index CFD. Shortly before the end of the trading day, the trader sells the EUR/USD position and buys back the index CFD. With no positions left open, the trader is now flat.

A flat market

A market or an individual share is also described as flat when its price moves sideways within a narrow range. In such phases there is no clear trend, which makes things difficult for trend-following strategies. Range traders, on the other hand, try to profit from the repeated swings between the upper and lower boundaries of the range.