Whether Forex trading is permissible by Islamic law is a matter that’s highly debated. Several primary viewpoints arise. The majority of scholars studying Islamic teachings determine Forex to be Halal as long as leverage and margin trading is not utilised, whereas others are opposed and declare it either outright Haram or a far more complex matter warranting extensive discussion. Let’s take a closer look at the various ways that the Muslim community at large perceives Forex so that traders can make an informed personal decision over whether or not FX markets are suited to their beliefs and ethics.
The Most Commonly Accepted View Of Forex
The first view, which rings true with the largest number of Islamic scholars, is as follows. Under the Islamic laws of both Sharia and Fiqh, the core mechanics of Forex trading are permitted by the Holy Qur’an and are therefore Halal. As long as the Forex trading system remains a spot market mechanic free from leverage or margins, it is permissible due to combining advance payments & brokerage, thereby never involving gambling which is Qimar transactions. However, if the system involves margins and rollover fees, then it is most definitely Haram.
Options, Futures, Bonds & Other Investment Types
Under this accepted interpretation, Forex trading is allowed as long as the individual is trading their own wealth and the exchange is immediate. Options, futures, bonds, CFDs, including options and futures, and mixed shares are all Haram. The Islamic Fiqh Council in Jeddah, no. 63 stipulates that options are neither wealth, benefits of wealth, nor an inherent equity due to man which makes options trading Haram. Under Sharia law, any activity that creates wealth from a non-productive activity is Haram due to being classified as gambling. While subjective and largely open to personal interpretation, almost every FX trader alive will argue that productivity is a primary concern and that a definite degree of skill is called for to manage risk, strategy and profitability. Gambling and Forex trading are not, by default, the same.
Islamic Forex Trading Accounts & CFDs
Islamic Forex accounts supply Forex trading services with no rollover or swap fees, no futures, no options, and zero spread betting. There is no interest charged that goes against Riba even when positions are held open for more than 24 hours. Furthermore, the lender shares in the borrower’s risk in accordance with Sharia law. Trading conventional CFDs is Haram due to the overnight interest typically charged. Islamic Forex accounts have no such fee, nor do they offer leverage on CFDs which makes these Contracts-For-Differences tailored to Muslims completely Halal. Traders need to do their own due diligence and find out whether the CFDs being considered for trading actually involve options and futures or not. If there are no options or futures included in the “basket” of assets, CFDs are a lucrative way to trade Forex.
FX Trading, An Individual Choice
If one enters into Forex trades with the correct intention and mindset, speculating on the change in value using logical fundamental analytics instead of guessing and thereby gambling based on mass opinions and influence, Forex is Halal, not Haram. However, the variables, the individual in question, and the Forex broker all determine whether or not a Muslim can trade in good faith. Certain FX products will proudly state that they’re certified by the Shariah Board. Such audits are an excellent way to gauge whether or not the trading platform offers Halal services such as valid remuneration of fees in exchange for services as are needed to fulfil Ujrah criteria. There are several factors for Shariah compliance which is why we advise you to consult a local Mufti at your Masjid to discern whether this grey area is permissible with a clear conscience.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only