Understand investment products, market mechanics, indicators and research terminology. Each entry includes an explanation, example, cautions and related learning.
Showing 1–8 of 8
Backtesting is the process of applying a fully specified trading or investment rule to historical data to see how it would have behaved, including its returns, losses and trading frequency. It is a research tool for studying a rule, not evidence that the rule will work in the future.
Backwardation describes a futures market in which contracts for later delivery are priced below nearer-dated contracts or the spot price. The futures curve then slopes downward as maturity lengthens.
A benchmark is a reference standard, usually an index or a blend of indexes, against which the performance and risk of a fund, portfolio or strategy is measured. It provides a yardstick for judging whether results came from skill, risk-taking or simply market movement.
The bid-ask spread is the difference between the highest price buyers are currently willing to pay (the bid) and the lowest price sellers are willing to accept (the ask). It is a cost of trading immediately and a common gauge of liquidity.
Bitcoin is a digital asset and payment network that runs on its own public blockchain without a central issuer. Software rules enforced by network participants cap its supply at 21 million coins.
A blockchain is a shared ledger that records transactions in linked blocks copied across many computers. Each block contains a cryptographic fingerprint of the one before it, so changing old records is detectable.
Bollinger Bands are a volatility envelope drawn around a moving average: a middle band, typically a 20-period simple moving average, with an upper and a lower band set a chosen number of standard deviations away, usually two. They were developed by John Bollinger.
A bond is a debt security in which an investor lends money to an issuer, such as a government or company, in return for scheduled interest payments and repayment of the principal at maturity.