Forex glossary K to L

From slang and nicknames to obscure strategies, organisational acronyms and financial institutions, the world of forex trading is littered with words and terms that can sound like a foreign language to the outsider or even the fledgling trader.

If you think pips should be in an apple and bears should be pooing in the woods, you might need our glossary of some of the more commonly used forex and trading terms:

glossary

K

Keeping your powder dry

Limiting your trading activity while conditions are unfavourable and waiting until they improve before making your move. The phrase comes from military/naval use of gunpowder.

Kill or fill

An order that cannot be partially filled. It’s all or nothing – if it cannot be completely filled, the order is cancelled or ‘killed’

Kiwi

Slang term for the New Zealand dollar (NZD).

Knock-in

A trading option requiring the underlying pair to trade at a certain price before a previously bought option becomes active. The strategy can be used to reduce premium costs and can also trigger hedging activities.

Knock-out

A trading option that negates a previously bought option if the underlying spot price hits a specified level.

L

 Ladder option

This option locks in gains when the underlying asset hits certain price levels, like rungs on a ladder. These gains remain locked in, even if the price drops subsequently.

Leverage

Also known as a margin, this is the multiplier that allows you to trade notional values higher than the capital you have in your trading account. A leverage of 50:1, for example, means you can trade 50 times more than the amount you have in your trading account.

Liability

In strictly forex terms, liability is the obligation to deliver an amount of currency to a counterparty on a specified date. It can also be used in more general terms to refer to any potential loss, debt or financial obligation.

LIBOR

The London Inter-Bank Offered Rate. This is the rate that banks use as a base rate when lending between one another.

Limit order

An order to make a trade only at a specified rate or better. This can be used in either direction: to buy at lower levels than the current market or sell at higher levels.

Limit price

The rate or price specified as part of a limit order.

Liquid market

A market that has sufficient active buyers and sellers.

Liquidation

In forex terms, this is the act of closing out short or long positions by offsetting transactions. In more general terms, it can also be used to refer to the selling of a bankrupt entity’s assets.

London session

The London trading session, between 8am and 5pm GMT.

Long position

A position where the base currency in a currency pair is bought, with the expectation that the market will rise. The position increases in value when the market price increases.

Loonie

Slang term for the US and Canadian dollar (USD/CAD) currency pair.