Flat On A Failure

DEFINITION of 'Flat On A Failure'

Closing out a position and taking profits when the security in question moves up to a target level but fails to break through it. This can be seen as a method of extracting what profit a trade has been able to produce so far because the trader believes that further movement past the target level is unlikely.

BREAKING DOWN 'Flat On A Failure'

For example, suppose that a trader is in a long position on a given currency pair and the exchange rate moves upward in her favor by a moderate amount, but fails to move past a key resistance level she was expecting to act as a catalyst for further movement. In this case, the trader would probably deem the trade flat on a failure and close the position, taking whatever profit has been earned.