Currency Trading Dictionary: Forex Trading Glossary – L
Lag
The number of bars that an indicator trails the current price. For example, a moving average will peak by a number of periods after the market price peaks. This period is generally half the length of the moving average.
Lead
The number of bars that an indictor designed to change prior to the price changing is ahead of the current price. For example, a rate-of-change oscillator may peak before the price peaks.
Leading Indicators
Economic indicators thought to forecast the future level or direction of economic activity.
Least Squares Method
A statistical method to derive the formula for a line that fits the data points by minimizing the sum of the squares of the deviations of the given points from the line. This method is used in calculating linear regression.
Lesser/Higher Degree
All waves are constructed internally of impulsive and corrective waves and ultimately all waves will be part of a larger wave pattern. Therefore, within a five-wave move higher that is labeled wave 1, waves 1, 3 and 5 (the impulse waves) will be constructed of five internal waves. These internal waves will be of “one lesser degree” to the larger wave 1. Also, the larger wave 1 may continue to develop as a five-wave move higher itself. These larger waves are of “one higher degree”.
In the example shown, the waves labeled in blue are of “one lesser degree” to the waves labeled in red. The waves labeled in red are of “one lesser degree” to the waves labeled in green and of “one higher degree” to the waves labeled in blue. The waves labeled in green are of “one higher degree” to the waves labeled in red.
Lettered Phase
(Elliott Wave)
Some analysts refer to the “lettered phase”. This refers to the section of the wave structure that forms the major corrective waves that are labeled A-B-C and occasionally also D and E.
Leverage
The ability to use a small amount of money to control a large trading position.
Limit Order
Used to enter the market at a specific price, or to exit a market at a specific profit target.
Line Chart
Plots the movement of currency prices over a successive period of time. Closing prices are most commonly used to construct line charts.
Liquidate
To close or get out of an existing position.
Liquidity
Over 85% of all FX transactions involve seven major currencies (AUD, CAD, CHF, Euro, GBP, JPY and USD). In a 1.5 trillion dollar daily market, traders are usually able to get in or out of currency positions in the major currencies.
Locked Limit
A market that has reached the maximum allowable price move permitted by an exchange, such as on a stock exchange. There is no such limit in the Foreign Exchange market.
Long
Trader has bought a currency with the expectation of selling it at a higher price.
Long Bars
(Candlestick)
A long bar is one in which the body is longer than average and where the body (between the open and close) is considerably longer than head and tail. A long bar represents a large shift in market perception of value from open to close. By themselves single bars do not necessarily provide any indications but will contribute to a group that represent a candlestick pattern. Long-term Trend
The overall direction in market prices are moving.
Lookback Interval
The number of periods of data used for the calculation of an indicator.
Lot
Refers to a standard trading contract, typically 100,000 units of the base currency.
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