Is Forex Trading Sharia Compliant?

Is Forex Trading Sharia Compliant?

When it comes to dilemmas within the Islamic jurisprudence, nothing creates more of a stir than the rules surrounding currency trading. In one regard, it deals in the exchange of currencies, via a form of hand-to-hand exchange, but in another regard contemporary scholars feel that when money is transferred to or from a bank account it constitutes no more than ‘delivery’. It means the issue of whether or not Forex trading is sharia complacent all the more relevant. This guide dissects the details involved and whether the Forex/FX account you’re looking at is sharia compliant.

Avoid Normal Forex/FX Accounts

Common Forex/FX accounts aren’t sharia compliant and shouldn’t be treated as such. This is because of the charging that occurs during overnight swaps. Forex/FX accounts encounter interest, either positively or negatively, when a position is held overnight. Obviously everything from borrowing costs to additional brokerage charges are involved. It is this that puts regular Forex/FX accounts in breach of sharia law and makes them not for individuals who live strictly by the rules of Islam.

Swap-free Accounts

Swap-free accounts don’t feature charges nor receive interest on any overnight swaps, this is the base level of an Islamic account, but each individual broker will have different additional features. Some may choose to keep it basic and waive overnight swaps, but in most cases they will only do this upon the agreement that a significant amount of money is initially deposited. While others may choose to waive the fees, but traders will have to adapt to wider spreads in order to be entitled to such. The last and lesser-seen option is that a broker will take a percentage of the profits made by a trader in order to make up for the loss of overnight swap fees during Forex/FX trading.

Popularity

What many will find interesting is that Islamic accounts are actually becoming increasingly popular with those who don’t actually practice Islam. As such accounts can also be of use to those who simply don’t want to incur overnight costs in other ways, or just don’t want to hold positions for that long. It is this increased popularity that has led to most brokers offering these special types of Forex/FX accounts more frequently. However, there are still a few in which they are operated under special request only. In such cases, you will need to speak with a brokerage firm directly in order to make sure that you qualify.

Final Thoughts

If you are a follower of Islam, then the stock market will never be a pick up and play realm. Research and knowledge of what can and can’t be done is important, but those who follow sharia law needn’t worry that there isn’t a form of Forex/FX account out there for them. The Islamic market has become well catered for in the 21st century, meaning that whether you follow Sharia or not, the Forex/FX market is a place where money can be made and religious beliefs observed.

Good source: http://www.onestopbrokers.com

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