A continually growing glossary of Forex Terminology

A

(Forex Terminology starting with A)

Account Balance

Amount of money in your account.

Appreciation

A currency is said to appreciate when price rises in response to market demand; an increase in the value of an asset.

Arbitrage

Taking advantage of countervailing prices in different markets by the purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market to profit from small price differentials.

ASIC

Australian Securities and Investment Commission. The government body responsible under the Corporations Act for regulating companies, the issue & sale of shares & trust units, company borrowings, & investment advisers & dealers.

Ask

The price/rate, that a willing seller is prepared to sell FX CFDs at.

At Limit

An order that places a limit on either the highest price you will pay (bid) or the lowest price you will accept (offer).

B

(Forex Terminology starting with B)

Balance-of-payments

All the international commercial and financial transactions of the residents of one country.

Balance

Amount of money in an account.

Bank of Canada (BOC)

The central bank of Canada.

Bank of England (BOE)

The central bank of the United Kingdom. It is a less independent central bank. The government may overwrite its decision.

Bank of Japan (BOJ)

The Japanese central bank. Although its Policy Board is still fully in charge of the monetary policy, changes are still subject to the approval of the Ministry of Finance (MOF). The BOJ targets the M2 aggregate.

Bar chart

A type of chart that 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

Balance of Trade

The value of exports less imports. Invisibles are normally excluded, which is why balance of trade is also referred to as mercantile or physical trade.

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.

Basis Point

One hundredth of a percent.

Bear

An investor who believes that prices/the market will decline.

Bear Market

A market distinguished by a prolonged period of declining prices accompanied with widespread pessimism.

Bid

The price that a buyer is prepared to buy FX-‐CFDs.

Bid/Ask Spread

The difference between the bid and offer prices; used to measure market liquidity. Narrower spreads usually signify high liquidity.

Big Figure

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.

Bollinger bands

A quantitative method that combines a moving average with the instrument’s volatility. The bands were designed to gauge whether the prices are high or low on a relative basis. They are plotted two standard deviations above and below a simple moving average. The bands look like an expanding and contracting envelope model. When the band contracts drastically, the signal is that volatility will expand sharply in the near future. An additional signal is a succession of two top formations, one outside the band followed by one inside. If it occurs above the band, it is a selling signal. When it occurs below the band, it is a buying signal.

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.

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)

Bundesbank

The central bank of Germany.

Business Inventories

An economic indicator that consists of the items produced and held for future sale.