Glossary
Welcome to the Kudotrade Glossary, here you will find clear and concise definitions of key terms and concepts, which are essential for navigating the world of financial markets and trading.
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Knock-out option
This is a type of barrier option in financial derivatives trading that ceases to exist (or “knocks out”) if the price of the underlying asset reaches a predetermined barrier level during the option’s life. Once the barrier is breached, the option is terminated, and the holder loses the right to exercise it further.
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Know your customer (KYC)
Verification of clients on a financial platform.
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Leading indicator
An economic indicator that offers information about future economic activity.
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Leverage
Leverage refers to the use of borrowed capital or debt to increase the potential return on an investment. It allows an investor or a company to control a larger position or asset with a smaller amount of their own capital.
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LIBOR
London Interbank Offered Rate, which is a point of reference interest rate within the financial markets.
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Liquidity
The ease with which an asset can be quickly converted into cash without significantly affecting its market price. It is a crucial concept in finance, reflecting the ability to buy or sell assets in the market efficiently.
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Liquidity provider
Plays an important role in the financial markets by offering to buy or sell assets, securities, or financial instruments to other market participants. They contribute to market liquidity by providing continuous quotes and ensuring that there are buyers and sellers available for trading activities.
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London session
The period in which the London financial markets are open for trading.
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Lot
A measurement used to determine the size of a particular deal. Typically, investors begin trading with one lot.
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Lot based commission
A fee charged by brokers or financial institutions for executing trades in financial markets, such as stocks, options, futures, or currencies (Forex). The commission is typically based on the volume or size of the trade, usually measured in standard lots or units of currency.
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Margin
This is the minimum fund you need in your account to make trades and helps brokers to guarantee the ability for you to open new positions and maintain them.
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Margin call
A request made by the broker for the trader to add more funds to the account in order to meet the minimum margin requirements.
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Market risk
The potential for financial losses due to movements in market prices. This type of risk affects the entire market and cannot be eliminated through diversification. It is inherent in all types of investments and can be influenced by a variety of factors, including economic changes, political events, and natural disasters.
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Market sentiment
The overall perception of market players towards an asset or the market as a whole, which has a direct impact on price movements.
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Micro lot
A standardised trading size that represents 1,000 units of the base currency in a currency pair and is also one of the smallest possible trade sizes in the forex market.
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Mini lot
This represents 10,000 units of the base currency.
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Monthly return
The difference between a user’s net worth at the start and end of a month, including any withdrawals or deposits made during that period.
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Nano lot
This is one tenth of the size of a micro lot and one hundredth of a mini lot, meaning it is worth 100 units of the base currency.
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Net income growth
This refers to the increase in a company’s net income over a specific period, typically measured on an annual basis. Net income, also known as net profit or net earnings, is the amount of profit that remains after all expenses, taxes, and costs have been deducted from total revenue.
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Net position
The worth of a trader’s position after deducting the initial cost of setting it up.
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Net profit margin
This is a financial metric that measures the percentage of net income derived from total revenue. It indicates how efficiently a company is converting revenue into actual profit after accounting for all expenses, including operating costs, interest, taxes, and other expenses.
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Net working capital
Net working capital (NWC) is a financial metric that represents the difference between a company’s current assets and current liabilities. It is an indicator of a company’s short-term liquidity and its ability to cover its short-term obligations with its short-term assets.
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New York session
The period in which the New York financial markets are open for trading.
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New York stock exchange
The New York Stock Exchange (NYSE) is one of the largest and most prestigious stock exchanges in the world; playing a significant role in the global financial markets.
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Offer
The price at which the seller is selling a product.
