Buying Forward

What is a 'Buying Forward'

A buying forward is an investment strategy that involves the buying of money market instruments or currencies in anticipation of a price rise or a future increase in demand. When there is anticipation or an expectation of a rise in security prices, or an increase in the demand levels of a particular currency, buying forward allows an investor to take advantage of future and potential profits by buying now, at a lower price, and selling when prices rise.


BREAKING DOWN 'Buying Forward'

The opposite of buying forward is selling forward. If an investor believes that the price of a security or the demand of a currency is going to drop, selling forward can help the investor mitigate loss because he or she is selling now, while the price is still high as opposed to selling at a loss when prices drop.

RELATED TERMS
  1. Forward Spread

    The price difference between the spot price of a security and ...
  2. Forward Market

    An over-the-counter marketplace that sets the price of a financial ...
  3. Losing The Points

    A currency trading term that describes when the banks' buying ...
  4. Currency Forward

    A binding contract in the foreign exchange market that locks ...
  5. Earning The Points

    A currency trading term that describes when the forward ask price ...
  6. Outright Forward

    A forward currency contract with a locked-in exchange rate and ...
Related Articles
  1. Trading

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  2. Trading

    Why Forward Contracts Are The Foundation Of All Derivatives

    This article expands on the complex structure of derivatives by explaining how an investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward ...
  3. Investing

    When To Sell Stocks

    Buying at the right price determines profit, but selling at the right price locks it in.
  4. Investing

    The Money Market Hedge: How It Works

    Investopedia explains how to hedge foreign exchange risk using the money market, the financial market in which highly liquid and short-term instruments like Treasury bills, bankers’ acceptances ...
  5. Investing

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  6. Trading

    How To Lock In An Exchange Rate

    Currency risk can be effectively hedged by locking in an exchange rate through the use of currency futures, forwards, options, or exchange-traded funds.
  7. ETFs & Mutual Funds

    3 Strategies to Mitigate Currency Risk (EUFX)

    Discover the often overlooked risk known as currency risk, and learn three strategies to mitigate or eliminate it in your portfolio.
  8. Markets

    What is a Forward Rate?

    Forward rate is used in both bond and currency trading to represent the current expectations of future bond interest rates or currency exchange rates.
  9. Investing

    A Look At the Buy Low, Sell High Strategy

    Learn how to buy low and sell high by using objective measures to identify opportunities. Buying low and selling high is the goal of every investor.
  10. Markets

    5 Tips On When To Sell Your Stock

    Many investors say knowing when to buy a stock is no big deal: It’s knowing when to sell that’s difficult. Here are five tips to help make the call.
RELATED FAQS
  1. Over what time period should I be looking at the forward rate?

    Read about forward rates and forward prices, how they function, and which rates you should look at based on your own investment ... Read Answer >>
  2. How is a share premium account taxed?

    Understand the difference between a spot rate and forward rate. Learn why someone would enter into a contract with a spot ... Read Answer >>
  3. What kinds of derivatives are types of forward commitments?

    Learn more about what a derivative is, what a forward commitment is and which types of derivative securities have forward ... Read Answer >>
  4. Why is the initial value of a forward contract set to zero?

    Discover why the initial value of a forward contract is set to zero; read about financial mathematics and exchange logic ... Read Answer >>
  5. How accurate is the forward rate in predicting interest rates?

    Find out why forward rates are inconsistent and limited predictors of actual future interest rates, primarily because the ... Read Answer >>
  6. How valuable is the forward rate as an overall economic indicator?

    Find out why the forward rate is considered an important economic indicator, the logic behind this consideration and possible ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center