Is Forex Trading Haram?
Who would have thought that trading would be a matter of religious faith? Is Forex trading haram or halal? Is the stock market haram?
In the case of Muslim traders, it is necessary to respect the principles of Islam in the context of trading. It’s where the concept of Islam trading comes in.
Let us introduce you to the concept of halal trading and how to do Islamic trading. You will also have an overview of the best Islam trading brokers. Finally, if you are a beginner, you will find a detailed tutorial to get you started.
For a long time, banking and investing were banned in countries where the laws of Islam occurred. Interest income prevented Muslims from using banking services. But gradually, however, Islamic finance came into being.
Is Forex trading haram?
If you are wondering if Forex trading is halal, it all depends on the conditions provided by an accredited broker. The same goes for the dilemma of whether the stock market is haram or halal?
It must be immediately outlined that not all brokers can be trustworthy. An unlicensed broker is not ultimately compatible with what is considered “Islamic trading.”
Organizations that issue quality licenses include Financial conduct authority (FCA), Cyprus securities and exchange commission (CySEC), US Securities and exchange commission (SEC), Australian Securities and investments commission (ASIC), and others. Usually, information on regulators features at the top or bottom of the broker’s website.
Generally, currency exchange could be both haram and halal, depending on the intent of the retail investor.
So let’s see what ethically Islamic online forex trading and banking investing, and the best kind of account to open.
There is haram trading and halal trading.
When it comes to trading Forex and Islamic laws, you need to be vigilant since it depends on the type of trading and brokerage service. Not every broker complies with Islamic rules of trading nor offers the proper account. Forex trading is halal if you opt for the broker that fits your religious code.
Is Forex trading haram – Trading Halal Meaning
First and foremost, you need to know financial activities prohibited by Islam laws.
- Payment and receipt in any form of interest. In basic trading, this is a swap-free account, charged when a position is open overnight. In the Islam trading account, this swap is intentionally removed.
- With the regular account, it is possible to exchange with a delay in the context of trading operations. However, some brokerage companies specifically remove this feature for Islam investing.
- In some cases forex is considered gambling. However, always bear in mind that trading is a professional activity. It requires analyzing the trends in the market, assesses companies and entire countries. Thus, it cannot be gambling, which is strictly prohibited by sharia.
- Lack of risk and benefit-sharing. In Forex trading, the risks and rewards are always at the same level. If an asset goes up, you get the income. If that asset declines in value, you suffer the loss.
Thus, a special Islamic forex account, Islamic forex trading, and Islamic stock account allow investing in the Islamic halal market.
Definition of Islamic trading account in Forex
The Islamic account allows forex traders to avoid the prohibitions of Islam and, at the same time to trade in the halal stock and foreign currency exchange. The Islamic account was developed specifically for those who wish to trade in the financial markets but are not able to use other accounts due to their religious values.
The stock market in an Islamic framework is broadly similar to traditional trading. Islamic trading involves opening buy and sell positions on Forex, CFDs (contract for difference) indices, commodity CFDs, equity CFDs, bond CFDs, and ETFs (exchange-traded funds).
Thanks to this, traders with Islamic accounts can achieve the same goals as traders with standard accounts.
A simple guide for Islamic traders
Islam trading differs from other trading methods on the market by its religiosity. It is clear that the way to do it will be totally different. To get started, just do as in the table above.
In the texts of the Koran and Islamic authorities, we give the green light to the followers of the trading, but we forbid their usury. Muslim traders are therefore not allowed to earn interest in their operations. They also cannot place long-term positions in assets.
Being a particular system, not all brokers adapt their system to Islam trading. So be sure to choose a broker that offers the Islam trading option before subscribing to an offer. For the rest, the details of the procedure to follow are just below.
Is the stock market haram in Islam- Investing in Stock Exchange
After we answered ” is forex trading haram” let’s tackle other investment types. To invest in the Islam stock market, you must choose an Islam broker. Islamic trading as opposed to other known trading methods in the market. It is a bit complex since it is clearly based on Shariah law, a code that governs the administrative and legal principles of Muslims, permissible according to Islamic law.
Few brokers adapt their system to Islam trading, to what is permissible in Islam. So the first thing to do is to do your research to find a broker who offers Islam trading. A suitable broker will allow you to meet these criteria:
- Do not yield interest
- Speculation must be done without delay and overnight interests
- The trader should not bet on high-risk trades
- There must be sharing of benefits and risks
In Conclusion – Is Forex trading haram
In general, the answer is NO if you, as a Muslim, do it with suitable brokers.
Muslims cannot take high risks, which is why a good grasp of analytical tools that minimize risk is more than necessary.
Without high risks, some would say that it is a kind of margin trading where the probability of making maximum money is low, and the probability of losing all of your money is also high. But for enthusiasts, this is a way of trading with respect for their religion.
With Islam trading, the trader does not seek to be rich at all costs. It should be enough just to seek to make profits that will allow him to live well. And although profits for Islamic traders are rarer than for others, some brokers have seen fit to adapt their systems to them to achieve a certain profit level.
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