Forex Trading: is it considered Haram or Halal?

There are many misconceptions about the financial markets. Some see them as a lottery, others claim that they can be used only by “capitalists” and remain off-limits to those practicing Islam. What can we say about it?

For a long time, banking was banned in countries where the rules of Islam are observed. Interest income and other characteristics, by their nature, prevented Muslims from using banking services. Gradually, however, Islamic finance came into being. And the world of trading has not been outdone.

Is Forex Trading Halal or Haram?

It all depends on the conditions provided by an accredited broker. It must be immediately established that not all brokers can be trusted. An unlicensed broker is not necessarily compatible with what is considered “Islamic trading”.

Organizations that issue quality licenses include: the Financial conduct authority (FCA), the Cyprus securities and exchange commission (CySEC), the US Securities and exchange commission (SEC), the Australian securities and investments commission (ASIC) and other. Usually, information on regulators is located at the top or bottom of the broker’s website.

To simply answer the question “is trading haram?” », There is haram trading and halal trading.

Here is a video for further explanation:

Financial activities that are prohibited by Islam

• Payment and receipt of any form of interest. In classic trading, this is a swap that is charged when a position is renewed overnight. In Islam trading, this swap is intentionally removed.
• Exchanges with a delay in the context of trading operations. As for the regular account, it is possible. However, some brokers specifically remove this feature for Islam trading and Islam investing.
• Games of chance. Note that trading is a professional investment activity. To do this, it is necessary to analyze the market, assess the development prospects of companies and entire countries. So it cannot be a game of chance.
• Lack of risk and benefit sharing. In trading, the risks and rewards are always equal. If an asset goes up in value, you get the income. If that asset declines in value, you suffer an equivalent loss.

Thus, there is a special Islamic trading account which allows investing in halal Islamic stock exchange.

Definition of Islamic trading account

The Islamic account allows the trader to avoid the prohibitions of Islam and at the same time to trade in the halal stock exchange. The account was created specifically for those who wish to trade in the financial markets, but cannot use other accounts due to their incompatibility with religious values.

The stock market in an Islamic framework is broadly similar to traditional trading. Islamic trading involves opening buy and sell positions on Forex, CFDs (contract for difference) indices, commodity CFDs, equity CFDs, bond CFDs and ETFs (exchange traded funds).
Thanks to this, traders with an Islamic account can achieve the same goals as traders with standard accounts.

How to open a halal Forex trading account?

This requires on the site to:

• Register in “Trader’s area”. To do this, indicate the country, last name, first name, email address and telephone number of the user and define a password for this account
• Apply to open an account. Just click on the blue button “OPEN A REAL ACCOUNT”
• Complete the application for opening a trading account. You must complete the questionnaire and select the “Trade.MT5” account. It is this type of account that allows you to create an Islamic account option
• Send the supporting documents. Such as a copy of your identity document (or your passport), proof of address, the customer contract which is automatically generated by the trader area
• Check if the Islamic account option is enabled
• Fund the CFD and Forex trading account. You can now start to open orders.