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Glossary of Investment Terms: B

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Settlement and related processes

Balance of Trade
The value of a country's exports minus its imports.

Balance-of-Payments
System of recording a country's economic transactions

Bar Chart
A charting method 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 horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line to the right of the bar.

Bank Notes
Paper issued by the central bank, redeemable as money and considered to be full legal tender.

Base Currency
The currency in which the operating results of the bank or institution are reported.

Base Price
One hundredth of a percentage point. 50 basis points [50bp] is half a percentage point.

Bear Market
A market distinguished by declining prices.

Bid Price
The bid is the the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.

Bear Call Spread
A spread designed to exploit falling exchange rates by purchasing a call option with a high exercise price and selling one with a low exercise price.

Bear Put Spread
A spread designed to exploit falling exchange rates by purchasing a put option with a high exercise price and selling one with a low exercise price.

Bid-Offer Spread
The difference between the buy (bid) and sell (offer) price of a currency or financial instrument.

Bilateral Grid
An exchange rate system which links all of the central rates of the EMS currencies in terms of the ECU.

Bollinger Bands
A quantitative method which combines a moving average with the instrument's volatility. The bands were designed to gauge whether the prices are high or low on 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.

Book
In a professional trading environment, a 'book' is the summary of a trader's or desk's total positions

Boris
Slang for Russian trading.

Breakaway gap
A price gap which occurs in the beginning of a new trend, many times at the end of a long consolidation period. It may also appear after the completion of major chart formations.

Break-Even Point
The price of a financial instrument at which the option buyer recovers the premium.

Bretton Woods  
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.

Broken Dates 
Deals that are undertaken for value dates that are not standard periods e.g. 1 month. The standard periods are 1 week, 2 weeks, 1,2,3,6, and 12 months. Terms also used are odd dates, or cock dates, broken period or broken period.

Broker
An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.

Bull Market
A market distinguished by rising prices.

Bundesbank
Germany's Central Bank.

Buying Rate
Rate at which a bank is prepared to buy foreign exchange. Also known as the Bid Rate.

Buying Selling FX
Buying and selling in the foreign exchange market always happens in the currency which is quoted first. "Buy dollar/mark" means buy the dollar/sell the mark. Traders buy when they expect a currency's value to rise and sell when they expect a currency to fall.