Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The term "Flat" refers to a specific type of corrective pattern in technical analysis characterized by a sideways movement that typically consists of three waves. In a flat pattern, the first wave and the third wave are generally equal in length, and the second wave retraces a portion of the first wave. This results in a structure that is somewhat horizontal and indicates a period of consolidation in the market.

The flat pattern is significant because it often suggests indecision among market participants, with buying and selling pressure being relatively balanced. This three-wave structure distinguishes it from other corrective patterns, as it specifically embodies a sideways arrangement, setting it apart in the analysis of price movements.

Different terms describe other patterns, such as triangles, which consist of converging trendlines and show a more complex interplay of price movements, or wedges, which can indicate potential reversals but do not fit the three-wave criteria. Flags are short-term continuation patterns that usually occur after a strong movement in price and involve two parallel trendlines, also differing from the flat's sideways movement and structure.