Flat market definition
A flat market describes when the price for a certain security neither rises or falls for a significant time period. Flat markets can occur when there is low trading volume or when increasing price movements on some securities are offset by declining price movements of other securities in the same index.
In forex, a flat market occurs when a currency pair fails to move significantly up or down and does not contribute a significant loss or gain to the forex trading position.
How to trade a flat market
Although flat markets typically move within a tight range, they can still be successfully traded using several different strategies:
- Boundary trading: Boundary, or range, trading involves drawing trend lines across the repeated, shallow highs and lows of the market and trading within the defined channel shown
- No-touch trading: A no-touch trade bets that an asset will not reach a certain price within a given timeframe and can be useful when a trader has identified constraints on the given market
- Scalping: Scalping involves executing trades that expire in a matter of seconds, taking advantage of small movements to accrue multiple wins.
If trading indices, a flat market can be overcome by instead trading single stocks until the index breaks out of the flat pattern.