The question as to whether Forex trading is permissible according to Islamic law is a difficult question to conclusively answer. Although Islamic authorities certainly agree that currency What is Islamic Forex Trading? Islamic Forex accounts also known as swap-free accounts are halal trading accounts in which interest is not accumulated, collected, or paid. These accounts An Islamic Forex account is a halal trading account that is offered to clients who respect the Quran and wish to invest in the Islamic stock market following the principles of Islamic The majority of Islamic jurists agrees that Forex trading can comply with Sharia only if it is spot trading (while futures and options are considered to earn Riba) and if it doesn't involve any The Islamic Forex trading community is divided on whether Forex trading is Halal or Haram. Making money by trading Forex is allowed because an individual has the right to ... read more
It is a well-grounded article covering every aspect of Forex trading and providing references to fundamental Islamic sources. Among other things, Dr. Mohammed Obaidullah proves margin Forex trading to be legal for Muslims , as long as it doesn't involve any Riba unlike some other Islamic jurists who look at margin Forex trading as forbidden activity. In this article, Forex hedging is also analyzed and is seen as a source of Riba income.
It is strongly recommended to read this article if you consider yourself a Muslim trader or if you only plan to start trading Forex while remaining a lawful Islamic believer. It is also recommended to look at the list of Forex brokers that offer Muslim-friendly trading accounts with no overnight-interest applied on the open positions. Islamic thought doesn't stand still and as Forex trading is a point of contention for scholars, and things change quickly in this field.
For example, In February 16, , the National Fatwa Council of Malaysia nation's supreme Islamic legal body announced that spot Forex trading performed by individual traders contrary to authorized dealers is considered haram sinful. Technically, it restricts all Muslim residents of Malaysia from participating in online foreign exchange trading. It is important to add that no other Muslim fatwa institution in other countries has issued similar prohibition.
On the contrary, the National Sharia Board of Indonesia had previous issued a fatwa the link is in Indonesian stating the legality of Forex. Apparently, the situation with Islamic Forex trading still remains quite unclear. And what do you think about legality of currency trading for Islamic believers? You can share your thoughts or ask your questions on our Forex forum.
If you want to get news of the most recent updates to our guides or anything else related to Forex trading, you can subscribe to our monthly newsletter.
According to Islamic law, the collection or payment of interest of any kind is strictly prohibited. Sharia law believes and dictates that Muslims should be giving for the sake of giving and not to receive something in return.
Read More. Choosing a Forex broker is something every new trader has to do at one point or another. This can be tricky if you do not know where to look or how to filter our the Forex scams out there.
If you are looking to open an Islamic Forex account, finding an Islamic Forex broker is no easier. What do I mean when I say Islamic Forex broker? To understand the meaning of an Islamic Forex account, you need to know some basic laws of Islam, also known as Sharia law. Among many other laws, one of the most fundamental laws when it comes to doing business with Muslims is the prohibition for a Muslim to take interest of any kind.
The Islamic religion believes that anything given or taken should be free of interest, which would indicate that the reasons behind the transaction were not pure. What this means when it comes to an Islamic Forex account is that rollover fees, for example, are strictly prohibited.
What are rollover fees? Forex trades, in theory, are supposed to be closed at the end of every trading day. If a trader leaves his positions open overnight, they need to pay rollover fees, which are interest payments that are generated when a position is left open overnight. Based on Sharia law, this type of payment is forbidden, and therefore Islamic Forex accounts are free of rollover fees. home Forex Fatwa Forex Brokers Forex Regulations Islamic Forex F. Q Market Updates.
Author - January 31, 0. Author - January 30, 0. Author - January 28, 0. Author - January 25, 0. Author - January 22, 0. Forex Islamic Accounts F A Q. Benefits of an Islamic broker. Interest-free leverage. Islamic Forex brokers will provide interest-free leverage. In other words, you can borrow entirely free of charge. No rollover interest. With an Islamic Forex account, your open positions will be closed by 5pm New York time to avoid rollover interest.
You can them re-open them immediately after that. Some brokers will open them on your behalf free of charge. Are there any disadvantages to an Islamic Account?
Many misconceptions and ambiguities surround the topic of Islamic forex trading and the Shariah laws governing Islamic finance. To be Sharia-compliant or Halal, Muslims must earn their money in a productive way, essentially meaning by providing goods, services or investing in assets.
A Muslim may not collect or pay interest when lending or borrowing money. Swap fees are derived from interest rates. The rules governing how Muslims may invest their money are extensive, but there is a lot open to interpretation. In essence, the Islamic financial system follows a set of moral and ethical principles, focusing on equality and responsibility.
Naturally, the wide range of investments products available today simply did not exist at the time when Gabriel narrated the Quran on behalf of Allah to Muhammad more than a thousand years ago. Many practices considered normal in western financial systems are prohibited haram or frowned upon makruh.
Riba, or interest payments, are considered an exploitative practice and are forbidden in Sharia Law. Several facts determine whether a product is halal or haram. The brokers listed below offer Islamic, swap-free trading accounts. Maisir, or gambling, is prohibited.
Some investment products, such as Binary Options, would clearly fall under this category and therefore are forbidden. In addition, gharar refers to excessive risk and uncertainty, both of which are banned concepts in Islamic finance. Short selling financial instruments, such as stocks or commodities using derivatives considered haram by most Islamic scholars as the trader does not own the underlying asset, and transactions should be backed by tangible assets.
Moreover, short selling comes with unlimited risk as an underlying instrument has no ceiling to how high it can go. Although there is no specific rule prohibiting day trading in Shariah Law, it is considered controversial due to the speculative nature, typical association with derivatives and lacks an essential function in society.
Just because a financial instrument is halal, such as buying shares in a company, the activities the company engages in is relevant. For example, a Muslim may not invest in a company that facilitates gambling, of the consumption of alcohol, or pork. Forex trading, under certain conditions, is permitted according to Shariah Law. Moreover, forex trading is a regulated activity in several Islamic nations. Forex trading is also a regulated activity in Lebanon, Labuan federal territory of Malaysia , Kuwait, Saudi Arabia, and several others.
Financial markets regulators in the Muslim world follow legislation heavily influenced by Shariah Law. Many forex brokers offer trading accounts designed to meet the requirements of Shariah Law and the principles articulated for Islamic finance.
Most international forex brokers also offer various contracts-for-difference products to go long or short on stocks, indices, commodities, futures, treasuries and more. Some of these products, such as treasuries and futures, should be excluded from Islamic forex accounts. The primary difference between a standard forex trading account and an Islamic trading account is the absence of swap fees.
Swap fees vary and fluctuate according to interest rates. In most cases, the trader will pay the broker, and in rare cases, the broker will pay the trader. Instead of applying swaps, some brokers charge a fixed fee for holding positions overnight. The fee could be a fixed percentage i. In many cases, brokers limit the number of instruments available to exclude any currencies with volatile interest rates to prevent losing money as they charge a fixed price.
In most cases, brokers only allow traders of the Muslim faith to open a swap-free trading account. In general, they will exercise common sense and take your name and location into consideration before asking for very personal information. However, when a broker refers explicitly to an Islamic account, it implies compliance with Sharia finance rules. Many Islamic scholars concur that CFD trading is not halal. When trading CFDs, you do not own the underlying asset, nor is there any intention to own it, as all CFDs are settled in cash.
Other characteristics of CFDs contradict Sharia law, such as the ability to short sell and utilize high amounts of leverage. Author: Mark Prosz. A portion of the Sign up links to brokers websites are affiliate links.
We may receive a commission with no charge to you. This enables us to keep creating helpful forex trading content for our readers for free. Islamic Forex Trading Many misconceptions and ambiguities surround the topic of Islamic forex trading and the Shariah laws governing Islamic finance.
Prohibition of paying or collecting interest Riba, or interest payments, are considered an exploitative practice and are forbidden in Sharia Law. Many FX brokers provide forex trading with overnight interest charges as a core function.
Islamic Forex Brokers List. Broker Type Market Maker Regulations ASIC, B. Prohibition of speculative activities, uncertainty and risk Maisir, or gambling, is prohibited. Does Islamic finance permit forex trading? Forex trading is regulated in multiple Islamic countries. Islamic forex trading accounts Many forex brokers offer trading accounts designed to meet the requirements of Shariah Law and the principles articulated for Islamic finance.
Islamic forex trading accounts are often referred to as swap-free accounts. Islamic account vs standard account The primary difference between a standard forex trading account and an Islamic trading account is the absence of swap fees.
Who can open a swap-free account? Each broker will have its own policy. For example, if your name is John Smith from New Zealand, they might ask for evidence. Is a swap-free trading account the same as an Islamic account? Forex brokers tend to use the terms swap-free account and Islamic account interchangeably.
Whereas a swap-free account merely refers to an account not charging swap fees. Is CFD trading permitted under Islamic finance? About This Article. Previous Post Lowest Spread Forex Brokers. Next Post Where to Buy Dogecoin in Canada. Best cTrader Forex Brokers Technical Analysis In Forex Trading Become a Forex Millionaire. Account Base Currency. Account Base Curreny.
Broker Type. Min Deposit. Max Leverage. Trading Platforms.
What is Islamic Forex Trading? Islamic Forex accounts also known as swap-free accounts are halal trading accounts in which interest is not accumulated, collected, or paid. These accounts The Islamic Forex trading community is divided on whether Forex trading is Halal or Haram. Making money by trading Forex is allowed because an individual has the right to The majority of Islamic jurists agrees that Forex trading can comply with Sharia only if it is spot trading (while futures and options are considered to earn Riba) and if it doesn't involve any While Islamic Forex is not what it sounds like and anyone can open an account with Islamic Forex brokers, it does go to show how the industry takes all demographics into consideration. An Islamic Forex account is a halal trading account that is offered to clients who respect the Quran and wish to invest in the Islamic stock market following the principles of Islamic The question as to whether Forex trading is permissible according to Islamic law is a difficult question to conclusively answer. Although Islamic authorities certainly agree that currency ... read more
These traders cannot receive or pay swaps interests for religious reasons. Another simple possible way to earn riba may even involve a spot transaction and a simultaneous forward transaction. As we have seen, there are certain grey areas within this qualification that must be investigated deeply in good faith and conscience by anyone wishing to begin halal Forex trading with a Muslim Forex account. On the contrary, parties to the contract reverse the transaction and the contract is settled in price difference only. Swap fees vary and fluctuate according to interest rates. Sign Up Enter your email. It also applies, by analogy qiyas to all species which are governed by the same efficient cause illa or which belong to any one of the genera of the six objects cited in the tradition.The interest problem also eliminates any possibility of trading Forex forwards, as there is always an interest is forex trading islamic involved in these transactions. In most cases, brokers only allow traders of the Muslim faith to open a swap-free trading account. We can start by saying that Islam recognizes that nearly all adult human beings strive to improve their financial positions, and that life involves a large element of uncertainty. It is true that paper currencies have completely replaced gold and silver as medium of exchange, is forex trading islamic, unit of account and store of value. Your day-to-day life must match your religious beliefs; it gives you peace of mind. Although there are no Islamic cryptocurrencies as such, that is, cryptocurrencies dedicated to Islamic finance, they work exactly the same as traditional Forex currency pairs. Proponents of the earlier version cite the case of exchange of paper currencies belonging to the same country in defense of their version.