Forward (Forward Contract)
Co-Founder•1 min read
A forward — or forward contract — is a binding agreement to buy or sell a currency at a fixed rate on a future date.
Unlike a spot trade, which settles immediately, a forward locks in today’s exchange rate for a transaction that will happen later — typically between one week and 12 months ahead (sometimes longer). This protects against exchange rate movements.
Example:
A UK importer agrees a forward contract today to buy €250,000 in three months at 1.17 GBP/EUR. No matter how the market moves, that fixed rate applies on the settlement date.
Used in:
FX hedging, trade finance, and cash flow planning for businesses with future foreign currency exposure.