Do you know what Islam says about online forex trading? There are people in Malaysia who are not sure if forex trading is halal or haram. Here is a detailed analysis to help you to know the truth.
The fatwa about forex trading in Malaysia depends on how traders involve themselves in their investments. Forex trading, according to Islam, is halal. Traders need to use the swap-free trading accounts for all their activities. The use of these accounts makes forex trading halal because they don’t elicit any interest element or riba.
To trade halal of forex is also not complicated. Several CFD brokers offer Islamic swap-free accounts for free. The open positions may be provided overnight with no interest. All these activities happen since Islam does not grade trading as haram.
Trading itself has the following characteristics to make it halal:
- There is no riba in trading;
- Islam allows for the hand to hand exchanges just as trade processes occur;
- All the tenets of Islam don’t describe currency exchange, stocks exchange, or commodities exchange as haram.
Does Islam Allow Forex Trading?
Most Muslims in Malaysia can only trade with forex after thorough consideration of the tenets and the Quran. Different people have varying opinions about this topic because some information sometimes contradicts the laws set to govern forex trade.
Online brokers who provide overnight currency pairs don’t charge any interest and are therefore very halal to use as an Islam. However, the Shariah law may not be reluctant to involve in such trades. They insist that there are some ways the brokers earn from the transaction even if it is not directly seen.
A regular spot forex trade allows traders to predict the future by watching the values of their currencies. The trading here is regular and can be regarded as hand to hand. Some Muslims may not find it a problem getting involved in such trades. However, forex trading is still going forward, and there are elements of interest involved. It makes the process forbidden.
Forex Trading with Non-Islamic Accounts Is Haram
Islamic law strictly condemns gambling. For such reasons, many people have varied thoughts about forex trading issues with Islam laws. The exchange between a broker and a dealer is hand to hand, which is allowed. Therefore, any non-Islamic account may not adhere to set rules and consequently be prohibited for all Muslims. As long as the trade has some elements of interest, then it is deemed as haram.
Currency trading can only be halal if the trading occurs with swap-free accounts. These accounts don’t pay or earn swap interests for any trade currencies, indices, or metals. The trading accounts also don’t pay or receive any interest rates making them halal.
Forex Trading Islamic Fatwa
As a culture of Islam, general trade is not bad. A person needs to earn, and there are several risks involved while doing business. Forex trading is not any different from investing in other avenues. Everyone has their way of making, and it is halal as long as it is genuine and there are no elements of interest involved.
Muslims may face opportunities to earn from time to time. When this occurs, they shouldn’t rush to grab that opportunity but should first look at the experiences of the people who have been involved in the same options before. The research should enable them to decide if the opportunity will not affect their faith and work with it.
Some people speculate that forex trading is allowed when some analysis is used to develop detailed information about the investment processes. Suppose traders can predict currency increase and decrease, and there is no speculation in the process. In that case, it is not similar to gambling, and forex trading will therefore be halal. Therefore, forex trading is halal.
However, the same forex trading can be haram in another situation. If the trader times when the trade will offer the best results, it can be considered conflicting with interest. Here is the major concern which makes Muslims shy away from forex trading.
Islamic trading is trying to reduce these issues, and it has made it easy while trading on forex. Muslims can now trade with chart-based analysis, and the trading will therefore be permissible by Shariah law. Still, research is needed to develop a common currency that increases or decreases in value. There should be no speculation because there is no chance for any form of gambling in the law.
What Islam Permits in Forex Trading
Muslims can trade more effectively when they check for Islam brokers on the trading platform. They have currently checked all the issues that connect forex trading, and a broker’s use is halal. The brokers make it easy to avoid getting critics as they can now operate without any fears while trading with forex brokers.
The use of forex brokers is also not a sort of complication that arises. It is only made legal since research has been done and the decisions were already made regarding the use of brokers with forex traders. Muslims can still do forex trading without having a pinch of betraying their faith.
The guidelines used with the laws are essential, and all Muslims are required to follow them. Muslim forex brokers also uphold every information about the avoidance of usury with a broad definition, speculation, and Muslims can readily trust them to work without riba.
Reasons Why Islamic Traders Need Swap-Free Accounts
Swap refers to the interest people get charged for overnight transactions in forex trading. The interest is obtained from the difference in the two currencies of trade of a pair. The interest between the Euro and the US dollar is the current interest rates between the two currencies.
The calculation differs depending on the order of the trade on the day you are trading in. Swap system if forex trading is therefore not seen like interest but rather a burden in the trading cost when the difference is negative. For these reasons, Islam needs a swap-free account which is also known as an Islamic account.
The swap-free account is adequate to avoid any swaps. Most brokers have to develop these features, which is beneficial to them and the Muslim trader. Shariah forbids followers to earn from the interest gained from trade because it looks like a form of usury. Swaps eliminate all forms of risks of acquiring swaps. The accounts are mainly for Muslim traders, but some brokers also allow it to be used by non-Muslim traders on forex.
Many people don’t want to use and apply the swap system due to its complexity. You can eliminate the risks effectively overnight by removing all swaps. There are some rules used with brokers when they provide swap-free accounts. They include:
- Islamic trader only: these are swap-free accounts that are only available for Muslim traders. There are unique verification processes that allow only Muslims to operate with these types of accounts;
- The Maximum Duration of Position happens when the swap-free account is not entirely free from rollovers. The accounts will have an expiration date for some brokers, and it can vary from three to ten days or more;
- The Commission: free swap may not imply that traders are free of overnight Commission. Some brokers charge fees as swap replacement so that they cover any negative rates that occur;
- Special trading conditions: here, swap-free is positioned as an extra feature with a social trading account and has its specifications.
Conclusion
Fatwa about forex trading in Malaysia does not dismiss forex trading. A Muslim trader can still follow this guide to ensure they are operating within the limits of the Shariah. Choose your broker well and trade without improper motives. Forex gambling is a controversial topic, and it only requires you to trade responsibly, invest and earn. Ensure you get a swap-free account for overnight trades from Islamic brokers.
To get the best services for swap-free accounts, visit broker XM for reliable and legitimate services. They offer all their services according to the Islamic faith. The effortless services are rendered quickly, and you will get the swap-free status of your trading account in your email quickly. Join today to enjoy excellent free and instant access to trading platforms.