What does Islam say on online forex trading? Is Forex Trading Haram or Halal in Islam? The answer is: Yes, forex is halal and CFD halal too.
Trading Forex is Halal because trading is a business where an entrepreneur risks his investment with the expectation of making money later. Forex trading is not gambling and there are no loans in this business (no repayment with interest) so this business does not violate Islamic religious laws.
But let us discuss this…
Halal or Haram for Forex Trading – Is forex trading legal in Islam
Halal or Haram, Muslims choosing to do Forex Trading are constantly thinking about their Religion and what part of the Quran they should follow. There are many opinions about this issue and in this article, the issues will be explained.
There are some Muslims who believe it is best for them to follow the words of the Prophet Mohammed :
If the types are different for then sell however you like, so long as it is hand to hand. Those who read these words will trade. However, there is another Islamic law that usury or any contract or business dealing that involves charging interest is strictly forbidden (Riba) and Forex trading has no interest calculations to be added or subtracted so this law does not affect the decisions made by Muslims.
Whenever online brokers tend to charge or pay the difference between the two sides of and currency pair whose position has been held overnight there is a fee that is not permissible and there are brokers “Islamic Shariah Forex Accounts” and they do not charge or pay standard interest.
However, there are those who adhere strictly to Shariah Law and they say since the brokers are finding other ways to earn from the trade they will not be involved in Forex trading.
Example – What types of trades are not allowed in Islamic accounts?
In a Regular Spot forex trade where traders predict an increase in the value of currencies and there is just regular trading, this could be seen as; hand to hand and there are some Muslims who won’t have a problem with this method of Forex trading.
However, with Forex trading forward, there is an element of interest involved so this is strictly forbidden.
Islamic law clearly prohibits gambling, and this causes some persons to wonder if the level of speculation that goes along with Forex trading is permissible for Muslims. However, the exchange that happens between the dealer and the broker would be hand to hand and that is allowed.
Forex Trading Islamic Fatwa
Islam understands that persons need to earn, and every trade is accompanied by some level of risk, and Forex Trading is just like all the rest. When Muslims are faced with many opportunities to earn, they will look at the experiences of the persons who were involved in those opportunities in the past and do research before decisions are made.
There are some persons who say Forex trading is allowed when the correct type of analysis is used. When traders are able to predict when a currency will increase, and another will decrease and there is no speculation they are not behaving like Gamblers, so Forex Trading is a good thing for Muslims to be involved in.
However, traders who time the trade in order to get the best results can be seen as persons who are breaking the Islamic law as there might be some speculation being done by them. This is where there is a concern and some Muslims might prefer to stay away from Forex trading completely.
What does Islam say on online forex trading?
With Islamic trading, Forex Trades should take effect immediately and it is seen as a natural part of commerce that is allowed by Islamic law.
Muslims must trade with chart-based analysis or fundamental analysis this will make Forex trading permissible by Shariah law. The regular chart-based analysis can be seen as speculation and it is not allowed.
For the Muslim, there needs to be a lot of research done to determine which currency will increase or decrease in value, as there can be no speculation since gambling is totally prohibited according to Islamic law.
Critics say it is best for Muslims to avoid Forex trading because the line between speculation and knowing how to trade can be easily blurred. Even though there are forex brokers who understand the laws, and they are willing to trade on behalf of Muslims.
Muslims can look at the lists of top Islamic Brokers whenever they want to do Forex Trading.
It seems to be possible for us to go on looking at the issues that surround Forex trading for many days and find it impossible to decide what position a Muslim should take when the issue of Forex Trading arises, some critics might say Muslims should not be using Brokers to trade on their behalf because technically they are still trading and earning from gambling and it is wrong.
However, trading without speculation is possible and this makes it perfectly fine for Muslims who are willing to do research and stay within certain boundaries to do Forex trading. It can be looked at as hand to hand trade that is permissible by the Shariah Law. These Muslims would not pay Brokers to trade on their behalf, they would do their own research and stay away from everything that crosses the line, so they would not be doing anything that looks like gambling, there would be nothing like interest payments and they wouldn’t be breaking the Islamic laws.
What Islam Permits – forex halal or haram?
Recently it was reported that Muslims who have looked at all the issues that are connected to Forex trading have decided that using a broker is allowed. This makes it easy for Muslims to put aside the statements that the critics made and start doing Forex trading as much as they want to.
Even though there are so many complications surrounding this issue, it is clear that research was done and decisions were made.
The law that involves usury and gambling is still being contemplated and Muslims are still finding ways to do Forex Trading in their own way.
The guidelines are still being used as the laws are important and Muslims are always encouraged to abide by them. The Muslim Forex account is different as all the Islamic laws are taken considered and upheld.
The Muslim Forex Brokers are persons who are determined to uphold the Islamic laws, they do all they can to avoid usury, which is defined very widely, forex forwards (which involves interest payments) and gambling or speculation and this makes it easy for other Muslims to trust them and use their services without fear.
In the middle of all the complications, it is clear, that somehow solutions were found for the many issues that seemed to stand in the way of Muslim Forex Traders and they are now trading in the markets every day.
The question as to whether Forex Trading is permissible according to the laws of Islam has been answered even though currency exchange under certain conditions is still halal. The lines are still blurred because computers and high-tech transactions were not present when hand to hand was implemented originally but it is clear, that Muslims found ways to adapt to the modern world.
A number of forex brokers have become Islamic Forex Brokers and offer Islamic forex accounts that offer standard interest payments, so they can make profits and keep on trading.
The Critics Point of View – is forex haram in Islam?
Critics are still saying Islamic Forex trading makes this type of commerce problematic, as the lines between gambling and smart trading or speculating can be blurred easily, and avoiding forex forward can be a bit difficult to avoid at times. They say it seems that though Islamic Forex Trading is just a camouflage. They believe it is impossible for Muslims to uphold the Islamic laws and do Forex trading.
However, it is clear that Muslims are not paying much attention to the critics, as they know that each trader will be guided by the laws that they hold dear and that is the most important thing to consider, in the middle of this very complicated issue. It is hard for those who have never been living according to specific laws to understand how it is possible for others to keep the laws when all the odds are stacked against them.
Forex trading in Islam halal or haram – I think HALAL!
Is driving a car is halal? Yes, it is! But if you drive your car every day 200 km/h you can hurt yourself and people, you will gamble with your life and life of other people. So the decision is up to you. Is forex trading regulated business? Yes. Do banks and biggest institutions around the world trade forex? Yes. There is the biggest chance to do insider trading in the stock market than in the forex industry. In the forex industry, there are no loans or market manipulation.
The good thing in forex that you can risk 1% per your equity and 99% of all your money is in your pocket.
And one more fact is Surah Al Baqarah, verse 275: “Trade is Halal, interest is Haram”.
The question will always be there, but the truth about How the Islamic laws are being upheld in the Forex-Markets can only be answered by the Muslim Traders alone and critics can only speculate. They really can’t tell if the Islamic laws are being upheld or not, by Muslim traders. Eventually, they might see this as an issue they should simply stop talking about, as they have no way of knowing what goes on in the mind of others.
Persons are finding more creative ways to do Forex trading, when there is a complication because of Islamic laws, and where there are professional individuals who are determined to do forex trading and make profits more solutions are being found for the problems that other persons are seeing as barriers every day.
Keeping Forex Trading alive and profitable is more important than all the words the critics are using at this time and as long as Muslims are finding ways to trade and they are comfortable with their choices, there is no reason for anyone to criticize them.