Definition of Buying forward

Buying forward is the purchase of commodities or securities at a specified price for delivery at a future date. When the price of the security or demand of a currency is expected to increase, buying forward helps an investor to gain benefit of future profits by buying at that point in time at a lesser price, and selling it when price increases.

Points to remember:

• The opposite of buying forward is selling forward.
• If an investor assumes that there would be a potential drop in the price or demand of the security or currency, selling forward can be applied/implemented/executed by the investor. This will save the investor from incurring a loss as he/she would be selling it at that moment when price drops.

Example:
For example, if a share is priced at Rs. 100 and it is expected to rise to Rs. 150, and if the investor buys this share at Rs. 100 and the prices jump to Rs. 160 in the future, he can sell it at Rs. 160 making a profit of Rs. 60.