Basis is the difference in price between the futures price and the price of the underlying asset. Over time, the basis is subject to certain changes. This implies that the price which was guaranteed by the hedger can differ from the cash price at the time of purchase of the futures contract. The longer the time between the process of opening and closing the futures position, the higher the guaranteed price.
A Basis point is a unit of measurement which is equal to one hundredth of a percent. When interest rates are calculated it is necessary to remove all ambiguity: in this case the unit becomes the base point. For example, an increase of the base rate from 7% to 7.2% would imply a 20 base point change.
Base Interest Rate
The Base Interest Rate (base rate) is a percentage value that central banks set as a guide for the financial sector as to define the price of credit in a country. The base rate depends on supply and demand for credit. Other banks borrow money from the central bank at the base rate and then set their own rates for their customers. A certain country’s base rate has a direct influence on the value of said country’s currency. This makes monitoring its changes a useful indicator for traders of forex.
Balance is the amount on a trading account, taking into account all completed transactions and trading operations, whilst also including non-trading operations for making deposits and withdrawals of funds from an account. Balance does not include open positions. Balance can be equal to Equity if there are no open positions on the account. In this instance, balance is calculated by: Balance = Deposit – Withdrawal.
A Beneficiary is someone who receives income from property which he uses as collateral when signing an agreement. Amongst other things it could be income from the rental of property or the transfer of stocks for the broker to use. Beneficiaries are defined by issuing banks as the holder of a credit letter. Moreover, a beneficiary could be someone who receives an insurance payment from an insurer.
Big Board is trader slang for the New York stock exchange. The exchange is the largest in the world in terms of the total cost of companies’ shares which from part of the listing. At this exchange the largest amount of stocks in the world are traded and over 3,000 corporations are quoted.
Break is used to signify the sharp rise and fall of prices. This is an indicator of monetary imbalances, whereby credit and debit are not equal. When this happens, it is necessary to receive additional information (e.g. from a counter broker) to complete trading operations.
Bretton Woods Agreement
In 1944 in Bretton Woods in the USA, members of the United Nations signed an agreement to establish a currency exchange rate system for economically developed nations. The US dollar became the reserve currency since, following the end of World War Two, the USA could guarantee the exchange of their currency for a fixed amount of gold. To support a system of international payments, the IMF (International Monetary Fund) was created. However, the Bretton Woods agreement did not take into account the fact that countries would seek to accumulate as big a dollar reserve as possible. This meant that the US could be put in a situation where it couldn’t cover the reserves using its gold. When Western Germany and France began to exchange their dollar reserves for gold in 1971 the US abandoned the obligations that they had assumed since 1994.
A broker carries out clients’ orders and fulfils the function of a middleman between the sellers and buyers of securities. In most cases, the client pays the broker for their services in the form of commission. There is also such a thing as a Floor/Pit Broker.
A trader or an investor who acts with the belief that the market and prices on a certain financial instrument (currency pair, stock, etc.) will rise. They open trades by buying (long position).
Backwardation is the purchase of futures contracts at a price less than the cost of the contracts with immediate delivery of the asset.
The most liquid of shares from the biggest companies which have stable indicators for returns over a long period of time. These shares are market indicators and price movements on them set the market trend. The term came from gambling whereby the most valuable chip in a casino is blue.
A Budget Deficit is a situation where the expenditure of a state’s budget exceeds that of its income. The reasons for a budget deficit can vary from cost reduction to redirect cash flows for the development of a certain segment, to there being an ineffective financial system and fiscal policy of a state. The main worry for states with a budget deficit is inflation leading to negative consequences for the said state’s economy. Although it also can have some positive consequences as it can stimulate demand and thus stimulate economic growth.
Blue-sky Laws are what they call a collection of laws which regulate the activity of market participants for securities in the USA. Not all of the laws are used by every US state.
A trader, investor or speculator who tries to force prices down: i.e. to cause a fall in the market or quotes of a specific asset. A Bear Market is a widely used term used to mean a fall in the market. A Bear Raid is a term used to mean that there is the intention to force the market downwards.
A Block house is a company which offers middle-man services to find buyers and sellers of large shareholdings. The block house broker doesn’t participate directly in the deal, only helping with the necessary processes of it.
Balance of Payments
The Balance of Payments is an indicator which shows the total economic operations of a state with other countries within an indicated period. A balance of payments report contains complete information about the funds which a state receives from other countries and vice versa. A current balance of payments indicates and includes the operations for the balance of services, the balance of income from investment and wages, the balance of transfers and others.
Buying Power is an amount of money which an investor has in order to purchase securities, taking Margin into account. In other words, the buying power is investors’ money which is on a broker’s account, plus extra funds which can be obtained. The development of a market is limited by the scope of existing buying power. In a general sense, buyer power is a synonym for purchasing power: an economic indicator which defines the amount of goods or services one can acquire with a certain currency.
Buy means to acquire a financial asset by opening a long position (and thus expecting the price of the asset to rise) or closing a short position (buying a good back at a lower price than it was sold for).
Buy on close
Buy on close is a purchase of an asset at its final quote price. From this, an acquisition of a financial asset during trading at a price which doesn’t differ too much from that of the close price is also known as a buy on close. Close price is understood as the cost of an asset at the end of the trading day.
The domestic financial market of the UK is known as the Bulldog Market. This name is down to the well-known British dog breed, the British Bulldog. Similarly, terms are actively used for the American (the Yankee) and Japanese (the Samurai) markets.
Bid is the price at which a trader can sell a financial instrument. Market orders, positions are closed, pending orders and Stop Loss and Take Profit are all executed at the Bid price.
Balance of Trade
Balance of Trade is a value which defines a country’s international trade: it is the difference between how much a country imports and how much it exports. The difference between the two is a measure of a country’s trade competitiveness. If a country exports more than it imports, then the said country’s currency will strengthen and is good for its economy. If the country imports more than it exports, the country is said to be uncompetitive. If the values are equal, a net balance is said to be formed.