Forward trade is an agreement between two parties to buy or sell an asset, on a specified date at a specified price.
The terms are traded bilaterally.
The classic example being a wheat farmer forward selling his produce at a known price in order to eliminate price risk.
Conversely, a bread factory may want to buy wheat in forward in order to plan production without the risk of price fluctuations.
This is an useful tool for both, to hedge their risks.
