Buying Forward

AAA

DEFINITION of 'Buying Forward'

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.


INVESTOPEDIA EXPLAINS '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. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  2. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  3. Currency

    A generally accepted form of money, including coins and paper ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, ...
  5. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  6. Eurodollar

    U.S.-dollar denominated deposits at foreign banks or foreign ...
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Options & Futures

    Bear Put Spreads: A Roaring Alternative To Short Selling

    This strategy allows you to stop chasing losses when you're feeling bearish.
  3. Options & Futures

    The Importance Of Time Value In Options Trading

    Move beyond simply buying calls and puts, and learn how to turn time-value decay into potential profits.
  4. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  5. Options & Futures

    Market Problems? Blame Investors

    Investors are only human, and their irrational behavior can often move the market.
  6. Options & Futures

    Prices Plunging? Buy A Put!

    You can make money on a falling stock. Find out how going long on a put can lead to profits.
  7. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  8. Investing Basics

    Understanding Risk Averse Investing

    Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ...
  9. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  10. Investing Basics

    What's a Closed-End Fund?

    A closed-end fund is a mutual fund that has an initial offering (IPO) of shares, and once those shares are sold, no additional shares are issued. Since it is a public offering, closed-end funds ...

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center