Back Office
The department and processes related to the settlement of financial transactions, including written confirmation and settlement of trades, and record keeping.
Back-Testing
The process of testing a set of rules that constitutes a mechanical trading system on historical data to determine the viability of the method. This normally involves optimization of the parameters for the trading rules employed and should also include Walk Forward testing to ensure the optimized parameters are stable.
Balance
Amount of money in a trading account.
Balance of Payments
A record of a nation’s claims and transactions with the rest of the world over a particular time period. These include imports and exports, services and capital flows.
Bandpass Filter
An algorithm that rejects high and low frequencies and passes only the frequencies in a predetermined range.
Bar Chart
A chart of price bars. Each bar shows the opening, closing, high and low price of a currency for a specific time period, with the length of the bar representing the range of prices traded for that time period.
Base Currency (Traded Currency)
The first currency in a currency pair. The base currency is the currency against which the second or pricing currency is quoted. In the Forex market the U.S. Dollar is most frequently the base currency.
Basis Points
One basis point equals 0.01% yield of a bond or note and therefore 100 basis points equals 1% of yield.
Bear Market
A period of sustained declining prices.
Bear Trap
This occurs when prices decline through a previously identified key support level (perhaps a triangle base) but is immediately reversed causing short positions to be stopped out and therefore is considered as providing a false bearish signal.
Bearish
If the market is “Bearish” it implies that the underlying price data has conditions that suggest the price should decline.
Bid
The price at which a dealer or trader is willing to buy a currency; also the price at which a trader can sell a currency.
Bid/Ask Spread
The difference between the bid and ask (offer) prices.
Big Figure
100 basis points of the underlying foreign exchange rate. This equates to 1.00 in USDJPY and 0.0100 in EURUSD
Blow Off Top
This is a dramatic rise in price that resembles a rising exponential curve. It is generally accompanied by strong volume and is often followed by a complete collapse in prices.
Boolean
George Boole, English logician (1815-1864), is credited with the invention of ‘Boolean logic’ in which information is represented as only one of two choices available such as true or false, 0 or 1, on or off.
Breakaway Gap
As a consolidation period or reversal formation is completed, price will exit the pattern with an opening price that causes a gap from that pattern. This could be a break through a trend line, a support or resistance line or even through a key point of the pattern such as the neckline of a head and shoulders pattern. Breakaway gaps are often filled during a brief correction after the break.
Breakeven Stop
Guards against a profitable trade turning into a loss. When the profit on a trade exceeds a certain amount, a breakeven stop order is generated at the trade entry price.
Bull Market
A period of sustained rising prices.
Bull Trap
This occurs when prices rally through a previously identified key resistance level (perhaps a triangle top) but is immediately reversed causing long positions to be stopped out and therefore is considered as providing a false bullish signal.
Bullish
If the market is “Bullish” it implies hat the underlying price data has conditions that suggest the price should rise.
Buy Order
An order to purchase the first, or base currency in terms of the pricing, or quote currency.
Buy Limit Order
Placed below the current market price, in an attempt to buy a currency for less than its current price.
“Buying the Dips”
The process of buying retracements or pullbacks in an uptrend.
Buyline
A number below which an indicator must fall before an upturn is considered significant.