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Forex Dictionary

Term Equivalent terms Definition
Back Office Operations The brokerage department that handles internal accounting, compliance with government regulations, legal matters, account record keeping, settlements, and clearing services.
Backtesting This is a process of testing the success/failure of a trading strategy using historical price/market data.
Bad Fill This is a slang trading term for a trade that is not executed at the price the trader wanted. Slippage due to volatility or some delay in execution are some of the reasons for it.
Balance of Trade BOT A country’s exports minus its imports. If the value of exports exceeds that of imports, the country has a trade surplus, while the opposite case is a trade deficit. An overly large trade deficit weakens the currency over time. See also trade deficit, trade surplus.
Band A range between two limits. In countries where the currency is pegged, the band represents the range in which the rates are permitted to fluctuate. Government regulation may also establish a band of acceptable inflation rates and take steps to ensure that they remain with that band.
Bank of Canada BOC The Bank of Canada is the central bank of Canada and is responsible for monetary policy.
Bank of England BOE Established in 1694 (second oldest central bank), it has three primary goals: 1) support the economic policies of the UK government to promote economic growth; 2) maintain price stability with a CPI inflation target of 2%; and 3) maintain financial stability, which means protecting against threats to the whole financial system (which means that in exceptional circumstances the Bank the Bank may act as the lender of last resort by extending credit when no other institution will.
Bank of Japan BOJ The central bank of Japan, established in 1882, it is responsible for issuing the yen, setting monetary policy, issuing Japanese government securities, and preserving a strong financial industry.The Bank of Japan is headquartered in Nihonbashi, Tokyo, on the site of a former gold mint (the Kinza), near the famous Ginza district, whose name means "silver mint". www.boj.or.jp/en/
Bank Rate The interest rate at which a central bank is prepared to make short-term loans to commercial banks. In general, a low interest rate indicates that the central bank is trying to promote growth by making liquidity easily available, whereas a high rate shows the central bank is concerned about inflationary pressures and so is trying to reduce the amount of money in the economy. In the United States, the bank rate is known as the federal funds rate, whereas in the United Kingdom the key interest rate is called the official bank rate, the lowest rate at which the Bank act as a lender of last resort to the money markets.
Bar Charts A popular format for studying the price action of currency pairs, a bar chart can represent any time frame and is made up of four elements: the Open, High, Low, and Close for the trading session/time period. The top of the bar represents the High, the bottom the Low, the small dash to the left represents the Open, and the small dash to the right the Close.
Base Currency The first currency listed in currency pair, the base currency is the currency against which exchange rates are generally quoted in a given country. Examples: for USD/JPY, the US Dollar is the base currency; for EUR/USD, the Euro is the base currency.
Basis Point One hundredth of one percent, or 0.0001.
Bear A trader who believes prices of a currency will decline, and so takes steps to limit losses or exploit profits if and when the market falls.
Bear Market A market distinguished by declining prices, usually for an extended period of time.
Bid Also known as the ‘bid price’ and ‘bid rate’, it is the quoted price at which an investor can sell a currency pair (seen as a lower quoted price than the ask). The difference between the bid and the ask is called the bid-ask spread.
Bid/Ask Spread This is the difference between the bid and price (Ask-Bid). The spread is how Forex brokers make money from our trades. Example: If the current bid price for the EUR/USD currency pair is 1.5750 and the current ask price is 1.5753, this means that you can sell the EUR/USD at 1.5750 and buy at 1.5753. The 3 pip difference is called the spread.
Big Figure The first two or three digits of a foreign exchange price or rate. Examples: for the USD/JPY rate of 88.30/32 the big figure is 88; for the EUR/USD price of 1.3318/1.3320 , the big figure is 1.3.
Bollinger Bands A popular volatility indicator, it plots three bands on to the underlying price curve: the moving average, and the bands themselves, which are two standard deviations above and below the moving average.
Book In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.
Brazilian Real BRL The official currency of Brazil is the Brazilian Real and it's currency code is BRL.
Bretton Woods Agreement An agreement signed by the original United Nations members in 1944 that established the international monetary fund (IMF) and the post-World War II international monetary system of fixed exchange rates. The system created a fixed exchange rate system with 1% fluctuations of the currency pegged to the price of gold at US $35 per ounce. The Agreement remained in place till 1971, when the United States under Nixon unilaterally depegged from gold and established a floating exchange rate for the major currencies.
British Pound GBP The currency of the United Kingdom, issued by the Bank of England, it is the third largest reserve currency in the world and is the oldest currency still in use. It was pegged to the US Dollar under the Bretton Woods System, but has become a floating currency since 1971. Also called Pound Sterling, or Cable.
Broker An individual or firm that executes orders to buy and sell currencies and related instruments for a commission or spread.
Bull Someone who believes that prices will rise, and so takes steps to limit losses or exploit profits when and if the market rises.
Bull Market A market distinguished by rising prices.
Bundesbank Germany’s Central Bank, established in 1957 and headquartered in Frankfurt, it issued the Deutsche mark until 2002 when it was replaced with the euro. Today, the Bundesbank remains the most influential member of the European System of Central Banks, and it has a lingering reputation of having a hard money (anti-inflationary) money policy.
Buy Limit Order A conditional order to buy a currency at the specified price (the limit) below the current market, or lower.
Buy On Margin Essentially means buying on credit. Margin refers to the portion that is put up rather than what is borrowed.
Buy Stop A limit order placed above the current market price, and once triggered, becomes a market order. Buy stops are used to exit short positions or start a new long position at the breakout price.
Buying/Selling Since currencies are always priced in pairs, all trades result in the simultaneous buying of one currency and the selling of another. Hopefully you buy the currency that increases in value relative to the one you sold. If the bought currency appreciates in value, then you must sell the currency back in order to lock in the profit.
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