A "Forward" contract in Forex trading is a customized agreement between two parties to buy or sell a specific amount of a currency at a predetermined exchange rate on a future date. Unlike standard spot transactions, which settle immediately, forward contracts are used to hedge against future currency fluctuations by locking in the exchange rate today for a transaction that will occur at a later date.
Forward contracts are particularly useful for businesses and investors who need to manage currency risk over time. Since they are customizable, the terms, including the amount, settlement date, and the rate, can be tailored to meet the specific needs of the parties involved.
However, it is important to note that forward contracts are binding agreements, meaning both parties are obligated to complete the transaction on the agreed date, regardless of market conditions at that time.
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