Islamic forex accounts, also known as swap-free accounts, are designed to cater to the needs of Muslim traders who are interested in trading in the forex market but by staying within the laws of the (Islamic) Sharia law. Under Islamic law, the payment and receipt of interest (riba) is strictly prohibited. The interest charge in forex is known as swap or rollover fee. These charges will be applied to any trade positions that are kept open for more than a day. The incidence of swap on overnight positions makes forex trading haram for Muslim traders. But you can engage in halal (permissible) forex trading by setting up an Islamic forex accounts. Today, we will look at the steps for opening an Islamic forex account and their benefits.
Step 1: Find a Halal Forex Broker
The first step in setting up an Islamic forex account is to find a forex broker that offers this type of account. They can be referred to as Halal forex brokers as they provide halal trading conditions to religious traders. Every forex broker doesn’t provide an Islamic forex account, so you need to do your research and find a forex broker that suits your requirements as a Muslim trader. An Islamic forex account is also known as swap-free accounts as they eliminate the interest element from forex trading by not applying swap charges to overnight positions. They may be charging a flat fee to cover the cost of keeping a position open but this does not fall into the category of interest or riba.
Step 2: Provide Your Personal Information
Once you have found a forex broker that offers Islamic forex accounts, you need to provide your personal information to open your trading account. This usually includes your name, email address, phone number, and an identity proof and residential address.You may also need to provide additional information, such as your trading experience and financial situation, depending on the broker’s requirements.
Step 3: Choose the Type of Islamic Forex Account
Most forex brokers offer different types of Islamic forex accounts, each with different trading conditions and features. You need to choose the type of account that best suits your needs and trading style. The primary account type that you choose will have an affect on your overall trading cost. Some of the factors you should consider when choosing an Islamic forex account include the minimum deposit, the maximum leverage, the trading platform, the spreads, and the commission fees. Some brokers may restrict certain trading styles on Islamic accounts and there can be limitations on the currency pairs you can choose for trading.
Step 4: Fund Your Islamic Forex Account
Once you have chosen the type of Islamic forex account, you need to fund your account to start trading. Some brokers may ask you to fund your account even before granting the swap-free status to your account. In that case, you will have to fund your account soon after verification and then you can request to convert your account to an Islamic trading account.
After these 4 simple steps, you can start trading on your Islamic forex account without worrying about riba. You get to trade freely and try long term trading strategies without breaking the religious rules. You can also seek advice from Islamic scholars to make sure your trading style is fully aligned with the Islamic values and morals.