Forex Glossary 1 – 1

Arbitrage

The act of discovering a price discrepancy for a commodity or a financial instrument on different markets and profiting by simultaneously buying at the lower price and selling at the higher price.

Ask

The price at which the broker/dealer is willing to sell. Also known as the “Offer” price. This is the price where the retail trader will typically buy a currency pair.

Aussie

Trader’s slang term for the Australian Dollar.

Back Office

The department at a broker which processes and clears the actual trades.

Bank of Canada

The Central bank of Canada

Bank of Japan (BOJ)

The Central Bank of Japan

Bar

Graphical representation of the price range during a time period on a Forex chart. On a 1 hour chart each bar represents the price range for an hour; on a 1 minute chart each bar represents the price range for 1 minute.

Base Pair

The currency in which other currencies are quoted in a pair. In the EURUSD pair the US Dollar is the base pair.

Basis Point

1/100 of a percent. The term is used extensively in the bond market. If the yield on a bond moves from 3.24% to 3.26% the yield is said to have increased by 2 “basis points”.

Bid

The price at which the broker/dealer is willing to buy. This is the price where the retail trader will typically sell a currency pair.

Bid/Ask Spread

The difference in pips between the bid and ask prices at any given moment. The “spread” changes based on market conditions.

Big Figure

Trader’s slang for the first 2 figures in a currency’s price. Since these figures tend not to change in normal trading they are often omitted in dealer quotes. Many displays show the first 2 figures in large numerals which is where the phrase first came from.

Broker/Dealer

A firm that acts as an intermediary between traders matching buy and sell orders and facilitating the transaction, usually for a fee.

Bundesbank

The Central Bank of Germany. Along with the Bank of Japan and the US Federal Reserve, the German Bundesbank exerts a huge influence on currency markets.