GLOSSARY

Leverage

Leverage is the use of borrowed capital in order to control an investment that its larger in value than the amount of available capital. In CFD trading, leverage is interest free, so it is not regarded as a typical loan. Leverage is normally presented as a ratio, for instance using leverage of 1:10 allows you to invest in a position that is worth ten times the value of your available capital. While the use of leverage can amplify your gains, it can also have the same effect on your losses should your trade move against you.

Limit Order

A limit order is an instruction to either buy or sell when the price reaches a predefined level. For a buy limit order the instruction would be to execute at X price or lower, for a sell limit order it would be to execute at X price or higher. Limit orders are a good way to prevent slippage as they essentially guarantee that a trade will be made according to certain price parameters or not at all. The disadvantage of placing limit orders is that in rapidly moving markets they run the risk of not being filled.

Liquidate

In trading liquidating simply means closing an open position either to lock-in your profits or to cut your losses.

Liquidity

Liquidity refers to how many buyers and sellers are actively participating in a market. The more buyers and sellers, the more of an asset is available for trading. Highly liquid markets are able to handle a great deal of buying and selling activity without the price substantially rising or falling.

Long Position

A long position, also known as “going long” or “longing” is the act of purchasing an asset under the assumption that it is due to rise in value. A simple way to remember this is that to buy is to go long.

Loonie

The Loonie is a nickname given by traders for the Canadian dollar. The name originates from the common loon, a bird that appears on the Canadian one dollar coin.

Lot

In forex trading 1 lot refers to 100,000 units of the base currency in a currency pair.

Lost Decade

Lost decades occur after severe economic crises and particularly after an economic bubble has burst. Sluggish economic growth, high unemployment and falling real-estate prices are typical phenomenons in such situations and the standards of living may take many years to be recovered to what they were used to be. The 1980’s are considered a lost decade for Latin America (La DécadaPerdida) after its debt levels spiralled out of control. Japan’s lost decade occurred in the 1990’s as a result of a massive asset bubble burst. The 2000’s are considered a lost decade for the United States, due to the dot-com bubble in the late 1990s followed by the sub-prime mortgage crisis in the latter half of the decade.

Leading Indicator

Leading indicators are “input-oriented” economic indicators that register change before it is felt by the economy. For instance, Money Supply, Building Permits and Manufacturing Orders are all considered leading indicators.

Latency

Trade latency refers to the time interval between an order being placed and its execution. Lower latency is desirable as it means that a trader has a higher possibility of securing the price displayed before the market moves. FxPro’s algorithmic traders can reduce the latency of their trading by subscribing to our VPS service. By loading their algorithms onto our Virtual Private Server they can reduce their trade latency to just 1 millisecond and run their algorithms around the clock without even needing to have their own trading terminal open.Find out more about FxPro VPS here.