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Saturday, September 6, 2008
FOREX GLOSSARY
Backwardation
Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments
A record of a nations claims of transactions with the rest of the world over a particular time period. These include merchandise, services and capital flows.
Balance of Trade
The value of a country's exports minus its imports.
Band
The range in which a currency is permitted to move. A system used in the ERM.
Banking day (or Business day)
Any day that commercial banks are open for business in the financial center of the country whose currency a position is taken.
Bank Line
Line of credit granted by a bank to a customer, also known as a "line."
Bank of Japan or BOJ
The central bank of Japan.
Bank Note
Paper issued by the central bank, redeemable as money and considered to be full legal tender
Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.
Bar Chart
A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar
Base Currency
The currency in which an investor or issuer maintains its book of accounts; the currency that other currencies are quoted against. In the forex market, the US Dollar is normally considered the `base` currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair
Base Rate
A term used predominantly in the UK for the rate used by banks to calculate the interest rate charged to borrowers. Top quality borrowers will pay a small amount over base rate while lesser quality credits will pay a rate much higher than the base rate.
Basis
The difference between the cash price and futures price.
Basis Point
One hundredth of a percent
Basis Trading
Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Bear
An investor who believes that price of an investment product is going to fall.
Bear Market
A market distinguished by a prolonged period of declining prices accompanied with widespread pessimism.
Bear Squeeze
The condition in the market where investors or traders who are short an investment product are forced to cover their position because a rising market condition, has inflicted losses on the account
Best-Efforts Basis
The execution of an order at the next available price taking into consideration the volume available to buy or sell at that price and the quantity and volume of orders that precede the customers order.
BID
Dealer phrase referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.36, but would be quoted verbally without the first three digits i.e. "30/36".
Big Figure
The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 110.00/06 the big figure is 110. GBP/USD price of 1.8450 the big figure is 1.84
Book
In a professional trading environment,a “book” is the summary of a trader’s or desk’s total positions
Bonds
Bonds are tradable instruments (debt securities) which are issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.
Break or Break out
Term used to describe a sudden or rapid fall in instruments pricing away from a consolidated range.
Bretton Woods Agreement of 1944
An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies
Broker
An individual, or firm, that acts as an intermediary, putting together buyers and sellers usually for a fee or commission. In contrast, a `dealer` commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Brokerage
Commission charged by a broker.
Buba
Bundesbank, Central Bank of Germany
Bull
An investor who believes that prices/the market will rise.
Bull Market
A market distinguished by a prolonged period of rising prices. (Opposite of bear market)
Business Day
Any day on which commercial banks are open for business other than Saturday or Sunday in the principal financial center of the country in whose currency a position is taken.
Buying Rate
Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
Buy Limit
Specifies the highest price at which the purchase of the Base Currency in a Currency Pair can be executed. The limit price in a Buy limit order should be BELOW the current dealing Ask price.
Buy On Margin
The process of buying a currency pair where a client pays cash for part of the overall value of the position. The word margin refers to the portion the investor puts up rather than the portion that is borrowed.
Buy Stop
A Buy Stop is a Stop Order that is placed ABOVE the current dealing Ask price and is not activated until the market Ask price is at or above the Stop Price. The buy stop order, once triggered, becomes a market order to buy at the current market price.
Labels: Forex Glossary
