The answer to whether trading is halal and allowed under Islamic law is not straightforward.
Under certain conditions exchanging of currencies is halal, however there are some difficulties around these exact conditions that need to be met.
Forex trading is not haram as long as there is no interest or riba involved, the deals are made hand to hand and the trades do not offend the tenets of Islam.
Under Islamic law usury or the charging of interest is not permissible. Any trade or deal where there is riba involved is prohibited. With a standard Forex trading account interest is charged on trades held overnight.
These days most Forex brokers offer islamic trading accounts. This means they do not charge any riba or interest. To compensate on the lost earnings the broker will normally charge a higher level of commission or spread.
The tricky part about these increased commissions and spreads is that they could be seen as just another way to charge the interest component.
Is Forex Trading Gambling?
The truth is that most traders are gambling and not trading.
If you are making trades when you have no idea if your strategy or method is profitable, then you are gambling.
If you are risking real money before you have worked out that you are a consistently profitable trader, then you are gambling.
A trader is not gambling because they know that even though they will make losses, overall they will come out on top profitable.
You can read more about if trading is gambling here.
What Does Islam Say About Online Forex Trading?
For trading to be allowed under Islamic laws there needs to be no riba or interest element.
The trades need to be conducted hand to hand and there needs to be a sound reason, logic and expectation that a financial gain is going to be made from the outcome.
Is it Haram to do Trading?
Making trades using a leveraged trading account involves using an interest element. This would make the trades haram.
However, there is no need to use leverage and you can use a Islamic Forex trading account that does not charge overnight interest.
Using a Halal Forex Broker With Islamic Account
Many brokers these days offer Islamic Forex broking accounts.
Some of the best Islamic brokers offer accounts with no rollover interest and no commissions or fees for account management. You can also get Islamic accounts that provide you with interest free leverage.
Read about the Best Islamic Brokers Here
Lastly
One of the trickiest aspects to whether Forex trading is permissible under Islam is that as a trader you do not expect to take delivery of the currency you are buying.
You are speculating normally with a CFD on whether the price will go higher or lower against another currency.
This along with whether you are trading or gambling when making your trades makes it a hard question to answer conclusively.
The best thing you could do is to talk to your own religious leader to seek advice.
Leave a Reply