P1:a/b P2:c/d QC:e/f T1:g
gloss JWBK182-McDowell April 25, 2008 16:35 Printer: Yet to come
190 GLOSSARYexistence. The left brain is responsible primarily for speech, logic, planning, and
analysis abilities. It tends to think in words as opposed to pictures and looks at the
details as opposed to the big picture. Those of us who are analytical and scientific
in nature are generally referred to as left-brain thinkers.
leverage The ability to control a dollar amount of a commodity or financial instru-
ment greater than the amount of personal capital employed. This ability is obtained
by using borrowed money, such as a margin account. The greater the leverage of
the position, the greater the potential is for profit or loss.
limit order This is an order in which you can set the maximum price you want to
pay for your purchase, or a minimum price you will accept as a seller.
limit position For many futures contracts, government regulations specify a max-
imum position size (such as number of contracts) that a speculator may hold.
limit price move For many futures contracts, the exchanges specify a maximum
amount by which the price can change on a single day. A market that increases in
price by this specified maximum is said to be limit-up, while a market that declines
by the maximum is said to be limit-down.
liquid market A market in which there are a large number of trades daily so that
most buy and sell orders can be executed without dramatically moving prices. In
other words, a liquid market allows you the ease of entry and exit.
liquidity The degree to which a given market is liquid. When volume is high, there
is usually a lot of liquidity. Low liquidity in markets can result in poor fills.
liquidity risk Risk when you enter a trade, which you may not have sufficient
liquidity to exit at your desired exit point.
long A position established with a buy order, which profits in a rising price mar-
ket. The term is also used to refer to the person or entity holding such a position.
long call To buy a call option.
long put To buy a put option.
lot The quantity of shares in which stocks are bought or sold. In futures markets,
a lot is called acontract.
MACD Seemoving average convergence/divergence.
margin To borrow money from a financial provider (broker or bank) to purchase
certain financial instruments.
margin call A Federal Reserve board and financial service provider requirement
that you deposit additional funds or sell some of your holdings to increase the eq-
uity in your margin account if it has fallen below the minimum.
margin debit The amount of money borrowed from a financial service provider.
margin risk Risk where you can lose more than the dollar amount in your
margined trading account.