Forex trading is a fantastic approach to increase your income and improve your financial situation. Many Islamists think that forex trading may be against Islamic law and this is why they refrain from getting involved in the market. However, If you trade forex using fundamental and/or technical analysis to make financial gains, then it is entirely permissible.
In fact, all trading activities in Islam are acceptable if the traders follow the rules of Shariah. In case you’re wondering what Shariah is then let me tell you. Shariah laws are Islamic morals or principles based on the holy book’s teachings–the Qur’an and the teachings of the prophet. Every Muslim must adhere to these rules in business, trade, or everyday life. Although trading is allowed in Islam to increase wealth and financial stability, there are certain restrictions that prohibit Muslims from getting involved in the financial markets. There are certain trading activities that are Halal (permissible) and Haram (prohibited).
In the article, we will discuss the factors that make it challenging for Muslims to trade in the forex market.
What Makes Trading Haram?
Haram is an Arabic term used to describe things or activities that are strictly prohibited. If a forex trader gambles, takes or gives interests, or uses unfair means of trading then forex trading is considered unjustified and haram. It is a common perception among many Islamic scholars that day trading, margin trading, futures and options trading are forbidden in Islam. Also, if a trader keeps trading positions open overnight or longer even then trading is accounted as haram. That’s because, in overnight open positions, traders have to pay rollover fees or swaps which are considered a form of interest.
How Can Muslims Trade Forex In A Halal Way?
Forex brokers have started offering Swap-free Islamic trading accounts to overcome this problem and help Muslim traders get started in the forex market without any worries. These trading accounts follow the rules of Shariah and help Muslim traders to trade in an environment without hurting their religious sentiment. As the name implies, there are no swaps or interests charged on holding positions longer. Swap-free accounts give traders the freedom to hold a position for however long they want without worrying about overnight charges. Just the fixed spreads must be paid by traders to the broker in exchange for their services.
Also, there are no strategies like day trading, margin trading, etc. Traders can only trade in the halal conventional way. Also, keep in mind that there are no overnight positions on the Scalping strategy thus there is no need to open an Islamic trading account.
Thanks to an Islamic forex account, Muslim traders can freely transact without paying exchange fees or accruing debt. As a result, the money earned via Islamic accounts is permissible and halal. But, whether or not you use an Islamic forex account is going to depend upon your financial objectives and your dedication to uphold your moral principles.