Trading, Stock Exchange, Forex - is it Halal or Haram? Where can you open a special Islamic account that will allow you to work with modern financial instruments that correspond to the traditions of Islam? These are the questions that interest Muslim traders.
I urge you not to perceive this site as a religious authority. There may be other principles in Islamic trade. If you are in doubt that the trade you are planning to conduct will be halal, then it is worth consulting with a religious leader. With its help, you can make the only correct decision that takes into account exactly your situation.
What are Islamic accounts
An Islamic account is a regular account, but subject to religious requirements. According to Sharia law, Muslims are forbidden to give money at interest, and to receive profit from this interest. To do this, many brokerage companies enable such clients to open special halal accounts.
An Islamic merchant account is a swap-free account. Therefore, it is different from other Forex accounts. Accrual of interest is not permissible according to Islamic Sharia rules. Therefore, traders who use an Islamic trading account do not receive income from the interest rates included in the calculation of the profit on the transaction when going through the night. In addition, there can be no delays in a transaction on an Islamic account. They are executed immediately. Therefore, transfers from account to account during transactions must be performed instantly. The costs are also payable immediately.
I have watched the emergence of halal investments in Forex for a long time. This is not news in the financial market. However, there are not many halal brokers that operate swap-free and offer their traders an Islamic trading account.
I know that in Europe you rarely hear such an account in advertisements. The explanation is simple - an Islamic trading account is not so profitable for brokers. Therefore, there are few traders who use them. One of these brokers is a forex robot Abiwhere Muslim clients can open an Islamic account.
What are the basic rules for trading on such an account
I recommend that you remember that there are four main principles of how to form a trade with a halal account:
- Interest rates cannot be applied (Fish).
- Orders must be executed instantly.
- Gambling is prohibited.
- Risk and reward must be separated.
The Western tradition of banking does not always allow you to write these four principles into your everyday life and work according to them. Therefore, in order to combine Western and Middle Eastern traditions, the Islamic account was created.
Such an account, I am sure, will be very convenient for those who intend to invest in Forex, while they do not need to separate trading from the principles associated with religion.
In addition, if you compare a regular trading account and an Islamic one, they will turn out to be very similar, only a few changes make them suitable for use by people who worship fundamental Islamic principles.
Islamic account opening rules
It is allowed to work through Islamic Forex accounts only if the correct registration procedure has been carried out. An easy way to do this is to register on the Abi website. To complete the procedure, you will need to fill out certain points during registration.
After registration, the trader receives a confirmation by e-mail. This means that the account has already been opened. Now you can start forming your first deposit. To do this, you need to choose a convenient payment method. After that, you can trade on the exchange. Now it has become much easier to open Islamic Forex accounts in order to use them in trading. In addition, you can withdraw funds from your account at any time.
If you need training, then this can be done using a demo account, Forex in this case will become more accessible and understandable. The important thing is that such an account makes the risks virtual. You will be able to work in real market conditions, but the funds will be virtual. The use of such an account will be free of charge.
Commissions when using an Islamic real account
Earlier, I have already mentioned that trading with an Islamic account on Forex is the absence of swaps. At the same time, traditional accounts cannot boast of such a thing. The swap is added to or subtracted from the trader's profit if his position was open from evening to morning. Formally, a short segment of the night. However, it is unacceptable for a Muslim to receive such a percentage, just as it is unacceptable to pay it. Forex trading for a Muslim is a special action!
But the accounts in question do not include swaps. Thus, Muslims can trade in Forex, as well as other instruments, such as the stock exchange. However, there are also commissions that traders pay. What is it about?
Muslim clients, for whom the priority is to trade on such accounts without violating their spiritual commandments, must pay the margin, administrative fees, as well as the necessary commissions. And this is not Riba, nor is it haram.
Stock Market and Forex - Halal or Haram
The Muslim world is growing and developing. Online trading tries to keep up with progress. Therefore, "to trade or not to trade in the stock market or in Forex for a Muslim" as a question is very popular and relevant. Next, consider the different views on whether trading in Forex and the stock market is allowed or is it a sin.
We will analyze Forex, the stock market, raw materials, as a result of which we will find an answer to what needs to be done to comply with halal trading, as well as what tools a Muslim can use on his account.
Forex - Halal or Haram?
This question is raised by Muslims. It is dictated by the desire to invest in the money and capital markets. Islam does not prohibit the search for methods of how to become more wealthy, however, doubts still persist about the financial markets.
Is it possible to combine the desire to trade currency and Islam?
If we take the basics of Forex trading, then it does not contradict the foundations of Islam and can be considered halal. Trading in Forex is easier and more affordable, so many are attracted by the opportunity to make large and quick profits. Every day there are more people who know about this opportunity and use it. It would seem, well, what can be not halal when buying and selling money? However, certain points should be taken into account in this case.
If you just buy euros for dollars and sell it when the dollar falls in value, then the deal will be halal. However, there are commission issues that are dealt with by a dedicated trading account.
Islamic account and swaps
If the payment of interest as well as its receipt is a problem, then the situation becomes more complicated. Most often, if a trader left a position after 22:00 in a futures transaction, and after midnight on a Forex or commodity market, then the broker must hold or charge the swap.
Why does the broker use an interest rate in these calculations? Because he provided a loan through leverage. A loan, by its very nature, is very beneficial to a broker. Precisely because during the calculation, interest is calculated - a swap, an ordinary trading account for a Muslim is haram.
If you look closely, you can borrow money in Islam. After the loan, you can invest them and expect a profit, and after making a profit, you can give it to the lender without interest.
Of course, having lost the swap on an Islamic account, the broker deducts the commission. Someone might say that this is a disguised swap. But for the most part, Muslim traders approve of this approach. This is why swap-free trading allows you to break the Riba ban.
How to trade on Islamic accounts
Yes, the point about percentage is a very important prohibition, but there is a nuance. It affects the work of the exchange itself. In Islam, you can trade only if the trade is carried out "hand in hand."
In the old days, transactions carried out by traders were carried out face to face. It seems that this is what trading "hand in hand" meant. But e-commerce has questioned this principle. Is it so?
Some traders claim that a deal between a trader and a broker is exactly a halal deal, because it is made between two different parties.
It is also believed that the exchange of funds should be carried out immediately in the session when the contract is concluded. This is why the operation must proceed without delay. This is exactly what happens in Forex - orders are executed in a matter of seconds and faster.
Is it possible to compare trading with gambling
Gambling is haram for a Muslim. However, is forex trading considered to be something like that?
When trading, buy and sell. This is done to make money. If the price increases or decreases, then capital can be increased.
It turns out that currency trading does not carry an element of randomness. It is based on the probability that the price will rise or fall. The task of the trader in this context is to make a correct forecast.
This is why currency trading is not a gamble, and investing based on market analysis is not haram.
The analysis that makes trading halal must be done on the basis of Strategywhich is built from concepts.
About risk and reward of trading
A big problem for an Islamic trader is the risk involved in trading. This element is governed by certain principles:
- Bai al inah (sale and buyback);
- Bai salam, Mudarabah (profit distribution);
- Bai muajjjal (credit sale);
- Bai bithaman ajil (deferred sale);
- Murabahah and Musawamah.
When an investment is made, an asset is acquired. If the asset rises in value, you can make a profit. But if an asset falls in price, it means a loss. Therefore, profit and risk are separated, as this is the principle of successful business. Therefore, trade with Islam is compatible.
Buying Shares with an Islamic Account
Buying shares is not haraam. So it is generally accepted. If you buy shares, you own a part of the company. But you can only buy shares of the company that works without contradicting the principles of Islam.
So, for example, Sazerac Co, which produces alcohol, or 888 Holdings from the gambling business, are not halal companies.
All halal companies are divided into two groups:
- their shares are allowed for purchase: from the field of maritime transport, real estate, medical equipment, furniture and others;
- No devout Muslim is allowed to buy their shares: companies producing alcohol, if they are associated with gambling, as well as banking companies.
It so happens that a company is only partially engaged in non-halal activities. In this case, its shares can be bought, but the amount of profit that corresponds to a part of the non-halal business will need to be given back.
If the company makes 10% of the profit that is related to the sale of alcohol, then 10% of the profit from investing in their shares will need to be donated.
Tools available on Islamic accounts
I recommend opening an account with the Abi Forex robot. Because here it will be possible to access the Forex market, it will also be possible to trade CFDs for difference on indices, CFDs, shares, commodities and bonds, cryptocurrencies, ETFs as exchange-traded funds.
When a Muslim is faced with the question - "what to trade?" Muslims can trade anything other than futures and bonds.
When a bond is issued, the interest rate is tied to its maturity. The price of a bond is determined by demand. But the return on investment depends on the percentage of the cost at the beginning of the transaction.
Therefore, for a Muslim, bonds are haram. They are linked to the interest rate. Even if you invest in them through CFDs, there will be a swap, and investing with a swap is investments with an interest rate.
Futures are also haram. When working with them, the exchange of goods is delayed. Therefore, execution is not considered instantaneous.
Of course, there are no cryptocurrencies created by the followers of Islam yet. And you can still open an Islamic account, Forex will allow you to work with cryptocurrency as if it were an ordinary currency. The price is determined in dollars. Therefore, its change depends on supply and demand, and, of course, on what happens to the dollar. Cryptocurrencies are not linked to an interest rate, so they can be traded to Muslims.
Trading in raw materials is halal. This asset is essentially a metal or some kind of agricultural product.
Islamic account and trading robot
The Forex robot is a very popular tool that is used all over the world. Its popularity determines the demand for an understanding of whether this program complies with Sharia principles.
The robot platform is allowed by Islam because this tool is a normal interface between a trader and a broker. It is important to take into account that when working with a robot or when using manual work, a trader will always be placed in the same conditions. The conditions will differ only if different accounts are used. Regular, professional or Islamic accounts provide different trading conditions.
Therefore, the most important thing that a follower of Islam should pay attention to is the type of trading account. If it is selected correctly, then there will be no prohibited actions.
You can find out more about how the robot works on the website.
How to trade with the strategy if the broker does not have an Islamic account
Day trading is one of the types. She means scalping or swing trading. Positions are opened here, which are closed before the end of trading sessions, until midnight.
Why is this type of trading interesting? Because you don't have to pay a swap. The only thing to keep track of is the closing time. If you do this before midnight, before the end of trading sessions, you will not have to pay the swap, so the interest will not be taken into account.
It turns out that day trader can do without an Islamic account. He will be able not to pay interest and not violate the rules of Sharia.
Why, then, is an Islamic account needed at all? It so happens that a position opened during the day leaves hope for further growth even after the night has passed. Therefore, it may not be closed, it may remain in the portfolio. To do this, you need to use an Islamic account. If a trader starts one like this, it's good, if not, then you need to have time to close the deal before the end of the working day, so as not to violate the principles of Islam.
Trading according to the rules of scalping in Islam
Scalping is also day trading. Traders who practice this method open many trades in a day. Up to 100 or more. They only charge a couple of points per trade.
This approach is suitable for a devout Muslim because a quickly closed deal does not provide for the payment or write-off of the interest rate in the form of a swap. Orders are closed in a minute or even a second. Therefore, a scalper-follower of Islam may not start an Islamic account, but get by with a standard one.
However, the scalper can apply an additional strategy at any time. According to it, he may want to hold the deal longer in his portfolio. In this case, you need to use an Islamic account. If this is not possible, then the deal must be closed before the end of the working day.
Swing trading in Forex and Islam
When a trader starts swing trading, he opens a trade for days and weeks. As a result, very often the trade will cross overnight. If this happens, then a swap will be charged on the transaction, and this is unacceptable for a Muslim trader. Therefore, it is simply necessary to use an Islamic account. Then the trade will be halal.
Harami - Is Forex encouraging haraam or is it a halal approach?
Harami is a candlestick configuration that is used by some traders in their trading. It has nothing to do with the word haram. Harami means pregnant in Japanese. Therefore, this pattern is absolutely halal.
Islamic Account - What Benefits Can Be Called
Islamic and regular Forex accounts have certain differences. The main thing is that an Islamic account excludes withholding or paying commission. swap... It is very useful! Especially - for those Muslim traders who build their trading on positions that close after the end of the previous day. Those who like to hold a position longer will appreciate these accounts.
There are whole strategies that involve working without swaps. For example, such strategies look very beneficial when working with exotic currency pairs. You can open a position there and not be afraid of huge swaps. Such pairs move rather slowly relative to the spread. Therefore, this approach can only become profitable for a Muslim trader with an Islamic account.
Islamic Account: Disadvantages
Of course, the swap can not only be negative. There are days when the direction of the quote movement coincides with the swap rules and it becomes positive. Thus, you can get a fairly good amount - more than 25% of the profit on a deal, for example, with a not very large take profit. It will be impossible to receive this amount on an Islamic account.
Very often, to compensate for their losses from a remote swap, the broker will set administrative fees that are fixed. This practice is common among banks in Muslim countries.
Find out for yourself the benefits of an Islamic trading account
Obviously, trading depends on the trader. However, a broker can also create more or less favorable conditions for trading. I suggest using the option that is right for you.
Check the trading conditions provided by forex brokers, try training on a demo account, open an Islamic account to start real trading.