The discussion surrounding whether forex trading is haram or not is complicated. Principles in Islam emphasize fair trading in business transactions and discourage any dealings that can negatively impact any person involved in the transaction.

Exchanging different types of currency and making a profit from it is permissible, but navigating the forex market is more complex than simple one-way deals because of the risk. Forex companies have other duties besides investing. Forex brokers connect investors with banks so they can borrow money for their investments. They also can use futures, options, and other contract dealings that are considered haram.

The forex market involves a lot of speculation that has given it an association with gambling, another haram activity. Investors use a variety of strategies to anticipate the movement of the market to increase the likelihood of making a return.

They watch the change in the value of different currencies without owning, buying, or selling the currency they are speculating on. Coming up with one concrete answer can be difficult because many factors need to be considered to determine if this type of trading is halal or haram. Some guidelines can be followed to keep it halal. Many people lean toward the view that it is not permissible, but there are ways to follow Islamic guidelines while making exchanges on the market. Not all trading accounts involve interest and gambling.

These are the types of platforms and accounts to use when looking for Muslim forex accounts. A swap is an interest rate differential between the two currencies that make a currency pair.

When this differential is positive and the position is kept to the next day, a small amount gets deposited in your trading account.

This is forbidden. To avoid swaps, either trade intraday close all your trades until the end of the trading day or use a swap free account. Most Forex brokers offer now swap free accounts for Muslim traders.

Use an ethical mindset. This is very difficult to express in words. Moreover, you must analyze the market and not simply ride a trend for profits. Treat trading as a job, and not as a game. This is simply because most professional traders do that. A trade to make a living, not to make a profit. To do that, first you need to learn money management techniques and why it is more important to focus on the potential losses first and then on the expected outcome.

Know the product you are selling. When you do that, you leave little room for error as for the reason why you take a trade. Define a proper plan for trading. Using risk-reward ratios with clear entries, exits and loss stops. Base your money management system on a set of rules to follow no matter what. Conclusion Above there are only a few of the things that make trading halal. september, Trade with the market leader now: eToro is one of the most popular brokers and has an excellent customers service.

Related posts: How to Hedge a Forex Account What to look for in a forex broker Disadvantages when Trading Forex Tips and Tricks When Trading the AUDUSD Pair Do Forex Trading and Stock Trading Mix? Close GDPR Cookie Settings. For many traders who are also Muslim, this could lead to gambling or even incurring interest payments, making forex trading haram. The whole argument of whether forex trading is halal or haram comes down to the argument, is forex trading gambling?

Gambling is considered haram and carries a huge black mark against forex traders who actively participate in gambling. This also leads onto a larger question of whether or not leverage in forex is halal, or haram.

The grey area of whether forex trading is haram, comes with the area of gambling. Forex trading, done properly, is not gambling. Every trade has the possibility of going bad at some point.

This is where having a good exit plan comes into place — your stop loss. Staying in a bad trade, which is the result of an ill timed stop loss, would be considered gambling and could make forex trading haram. The biggest no-no when it comes to forex trading as a Muslim is to trade on emotion.

Traders of the Muslim faith need to understand that this is the biggest sin of all. Trading on emotion will lead to bad trading habits, which can result in you making buying or selling decisions based on your feelings. This is the exact same thing as gambling, so keep emotions out of forex trading if do want it to be halal.

Incurring any type of interest, whether positive or negative, is considered haram.

Is Forex trading halal or haram in Islam is one of the most complex questions in Islamic finance. The stock market is complex, but the Forex market though it may not seem is even more complicated.

Forex is more than just trading currencies, it involves many types of contracts futures, forwards, and options , interest Riba , and speculation. On the flip side, making a profit from currency trading is permissible in Islam. However, this is the short answer, and to truly understand the concept, we will need to dive deeper and ask the more difficult questions.

In this article, we will explore Forex trading and whether it is Haram or haram in Islam in the light of fatwas by religious scholars. Classic Forex trading is regarded Haram by most Muslim scholars as it involves some form of Riba and Gharar because of the loans used to make large transactions. If you want to become a Forex trader, then Islamic Forex accounts that practice Shariah principles are a great place to start.

Table of Contents : 1. What is Forex Trading? Types of Tradings that are Haram in Islam 3. Why and When is Forex Trading Considered Halal? When And Why Is Forex Trading Considered Haram? Is Forex Trading Considered to be Gambling? What is Islamic Forex Trading? Fatwas about Forex Trading Being Halal or Not. Forex stands for Foreign Exchange and is the largest financial market on Earth. It runs 24 hours a day, five days a week, which makes it a very liquid market to invest in.

Forex trading works similar to trading other securities such as stocks with one exception, Forex trading is done in pairs of two currencies. In Forex Trading, investors sell one currency to buy another. Since currency prices are always fluctuating, they make a profit when the currency they bought moves up against the currency they sold. Participants in the Forex network include brokers, commercial banks, investment bankers, and retail investors.

Islam emphasizes fair trading in all business transactions and discourages dealings that have a negative impact on one or the other party. There are four types of tradings that are considered haram in Islam:.

The basic idea of Forex is that you make money profit by buying and selling different currencies. In itself, buying and selling currencies is not Haram, but it is subject to certain conditions. According to the fatwa below and the interpretation of multiple sheikhs, dealing in two different currencies is permissible in Islam as long as the contract and exchange are made in the same sitting.

According to a report narrated by Ubaadah ibn-al-Saamit, Hazarat Muhammad Peace be upon Him said:. Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then as you wish, payment is made hand to hand.

Learn more about the halal way of taking a loan in Gold and how a Muslim ought to pay back a loan in gold. Dealing in the same type of currency for example, one USD for two USD is considered Riba and is not permissible in Islam. In the case of the same currency, both the amounts should be equal and the contract and exchange must take place in the same sitting.

Exchanging currencies and making a profit is considered permissible , but Forex is much more complicated than that. The fluctuation in currency is very small and currencies move only a small fraction at a time. Therefore, to make a profit in Forex trading, you need to invest a large sum. For example, if someone makes a cent in profit for every pound they invest, then for a thousand dollars, they will make a ten dollar profit, which is not exactly an attractive amount.

On the other hand, if someone invests a hundred thousand dollars, then they will make a profit of a thousand dollars, which is serious money. This brings us to our next point, leverage — borrowing. Forex companies do more than just investing. Forex brokers connect potential investors with banks and institutions from which they borrow money to invest on certain conditions.

They also often trade in futures and forwards contracts that are considered haram in Islam source. Once again, borrowing money for forex trading in itself is not haram.

The issue here is that there are strings attached to the borrowed money. The broker only lets the investor borrow money to transact through them on which they can make a brokerage fee — a fixed return on each loan. Islam allows only one type of loan, Qard-e-Hasan — an interest-free loan. Secondly, in a Forex trade, a swap fee is charged when an investor holds on to an open position overnight. According to most Muslim scholars, this swap or delay fee is considered Riba and is therefore haram source.

Charging a fixed amount on a loan is Riba which is haram and the Islamic scholars have a consensus over it. O you who believe! Fear Allah and give up what remains due to you from Riba from now onward if you are really believers. And if you do not do it, then take a notice of war from Allah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly by asking more than your capital sums , and you shall not be dealt with unjustly by receiving less than your capital sums.

Forex trading is considered Gharar — uncertainty because it involves excessive risk. In Forex trading, investors borrow huge amounts of money to invest in the Forex market, which brings harm to both the investor and the economy in general. Not only does this kind of transaction involve risk, but it often involves cheating and misleading people to get easy money. Furthermore, Forex investors often make an attempt to anticipate the varying value of a currency without owning, buying, or selling the currency.

That falls under the category of speculation or gambling deeming the trade haram. However, Forex is not mere speculation but involves research, market analysis, and making use of historic data to determine the best strategy and minimize risk. Islamic Forex accounts also known as swap-free accounts are halal trading accounts in which interest is not accumulated, collected, or paid.

These accounts do not make use of the futures or forward contracts. In an Islamic Forex account, all transactions including the transaction costs take place immediately and without any delay.

Mufti Taqi Usmani, a leading scholar, and Islamic finance expert was asked the following question:. Is Forex currency trading halal? I have attached a document detailing the aspects of the business. I went through the papers sent by you. I am of the opinion that these transactions are not compliant with Shariah.

The very condition that you cannot take delivery of the purchased currency makes it impermissible. Moreover, there are other elements according to my knowledge that makes this trade unlawful in Shariah, such as, forward sales, short sales etc. This is in addition to the fact that the currencies are originally a medium of exchange and should only be exchanged for personal use in different countries.

To make them a tradable commodity only for earning a profit is also against the basic philosophy of Islamic economics. I would therefore not advise you to indulge in this trade.

Is it permissible to deal in currencies in the foreign exchange market forex over the Internet? What is your opinion regarding the issue of tabiyeet stipulating interest for not using the deal at the same day?

What is also your opinion about the clearing process which is to delay submitting one to two days after the contract ends. It is permissible to deal in currencies if the deal is done hand to hand and the transaction is free of conditions that stipulate riba, such as the stipulation of fees for delaying the deal, which is interest that is charged to the investor if he does not take a decision concerning the deal on the same day..

Many Muslims wonder whether options are haram in Photo Courtesy: K Savings accounts from conventional banks can be considered haram because they pay you back with interest. However, savings accounts in Islamic banks are halal. This is Skip to content Photo Courtesy: Simple FX.

Photo Courtesy: Matthew Powell. Continue Reading.

Using a platform that has brokers will reduce the risk of being charged overnight interest or creating situations that will make a trade haram. Classic Forex trading is regarded Haram by most Muslim scholars as it involves some form of Riba and Gharar because of the loans used to make large transactions. Forex trading works similar to trading other securities such as stocks with one exception, Forex trading is done in pairs of two currencies. The earlier explanation gives the answer. org tv channel : albahjah. One can easily change the tone and the bias, however, and make it haram.

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