Business Foreign Exchange can Lead your Business to New Horizons

There are thousands of forex brokers and online foreign exchange firms available in the market. Even in UK, there exists many forex firms which provide business foreign exchange (also known as commercial foreign exchange) services. To find the reliable company, investors can take help of the world wide web platform. Search on google by simply typing business foreign exchange or simply foreign exchange services. Visit the websites resulted in the search. Your criteria to select reliable commercial foreign exchange firm should involve the experience of firm in this particular service sector, reputation in the market, response of their representatives while discussing online or on phone, commission or any other fee, minimum investment amount, demo account, feedback from existing clients, etc. If you are in UK and want to start forex trading then choose the firm which has its office near your locality. The UK forex trading firm you choose should be authorized by FSA.

What is Currency Forward Contract?

FX Forward Contract to Safeguard your Hard Earned Cash

A FX forward contract or merely a forward contract is a financial deal between two counter parties to buy or sell specific goods and services with a fixed price and on a specific date of future. This is exactly adverse of spot contract. Forex broker or firm offer FX forward contract to hedge clients hard earned cash from the negative fluctuations of the exchange rates. In general, you need not to pay any fees to sign a FX forward contract. The day fixed by both parties is known as delivery date and price is known as forward exchange rates or simply forward price. Unlike spot rates, forward exchange rates are offered for longer period like 1month, 3month,6month,etc. But delivery time is generally within 1 year. Forward price is calculated based on the spot price of particular currency. The difference between the spot price and forward price is either known as forward premium or forward discount, which is nothing but a check to know if trader is making gain or losing money.

Businesses often encounter the need for forward contract. For example a US company want to sell goods to one European company but buyer needs time of 1 year to make payment. Now, if both the companies have to enter in a deal today then how seller will decide the exchange rate after 1 year? Forward contract helps businesses to resolve such financial issues. In forex, the future price of currency is greater than the spot price thus spot price, delivery time and interest rate of currencies are considered to count the forward exchange rate for 1 year. In forward contract, forex specialist consider the future value of both currencies. And there is a standard formula to calculate future value of currency which is as follows :

Once the future currency value of base and quote currency is known, put the figures in below equation and calculate forward exchange rate:

Forward Exchange Rate x Future Value of Base Currency = Spot Price x Future Value of Quote Currency