What is a forward market?
An over-the-counter market that's used for trading assets when the price of the asset is fixed for delivery at a future date.
Where have you heard about a forward market?
The term is most often used when talking about the foreign exchange market, but it can also apply to markets dealing in commodities and securities.
What you need to know about forward markets.
Forward trading is a form of hedging against unexpected or unwanted price fluctuations. A forward contract is a customised agreement between two parties to buy or sell an asset at a future date at a fixed price. This can be beneficial when trading on currency markets which can be extremely volatile.
The forward market differs from the futures market in that it’s an over-the-counter market as opposed to an exchange. This means the terms of the contract can be customised to suit both parties, but there is a higher degree of counterparty risk.
Find out more about forward markets.
Futures contracts are a standardised form of forward contracts. Find out about the differences in our definition.