Islamic Forex Trading
Islamic finance is the practice of investment according to the principles of Islam. Similarly, Islamic Forex trading complies with Islamic laws. Two striking features of Islamic finance are:
- It proposes a risk-sharing philosophy wherein the lender must share in the borrower’s risk.
- The purpose of Islamic finance is to promote economic and social development through specific business practices.
Islamic Forex trading Account needs to conform to Islamic finance principles. The regular Forex accounts charge interests (Riba), which is against the religious beliefs of Islam. For this reason, several Forex Brokers offer their clients to select the ISLAMIC FOREX ACCOUNT while opening an account for Forex trading.
However, all Islamic Forex Brokers are not the same. Their terms of Islamic Forex Accounts differ significantly. You must carefully consider your religious guidelines, your requirements as a trader and a broker’s features before opening an Islamic Forex Trading Account.
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What is Islamic Forex trading Account? - Swap Free Islamic Account
The Forex trading accounts specifically designed to comply with Islamic principles are known as Islamic Forex Accounts. The Islamic forex accounts ensure that the traders belonging to the Islamic faith engage in forex trading, without breaking the laws of the religion. These Islamic forex trading accounts are also known as swap free trading accounts in the forex market. Sharia law prohibits the accrual of interest on funds deposited in the trading account. Hence the Islamic Accounts must not incur interest or roll over swap for a position that remains opens beyond the New York market i.e 5 pm EST.
The Swap Free trading account or Islamic trading account doesn’t charge any interest or Riba for positions held overnight or more extended periods. The Forex Brokers offering Islamic Forex Account try their best to stay compliant with the Shari’a Law.
In the Islamic religion, “Riba”, which means making money in the form of interest is not allowed. Taking money as Interest or Making money from money, or “Riba,” is not permitted by Sharia law. Riba is considered as an unjust and exploitative method of making money in business.
Gharar is an Arabic word and it roughly translates to “gambling” and is prohibited in Islam. Some Islamic scholars have the opinion that speculating on the forex market by trading currency pairs or CFDs is gambling. Nevertheless, long term and sound investments made in the Forex market, Capital markets, and the Stock market may generally not be considered gambling.
How to select a broker for Islamic trading Account
When selecting a broker to operate your Islamic trading account, one needs to make an analysis carefully. Choosing the account type is important. You should consider the trading conditions and customer service before opening an account. Also one may choose to operate through two different brokers to see which one gives better results. Also sometimes trader is willing to take higher spreads to get better results or even better customer service.
There are several brokers available on the Internet for carrying out Forex trading. You must analyze their terms and conditions for offering Islamic Forex account. You should check the reputation, popularity and track record of the broker before you put your hard earned money for trading.
In this world of profit-oriented businesses, it becomes imperative to sustain specific ethical and moral standards. Islamic finance principles adhere to the same. As per the Muslim law, one can not carry out any business and financial contracts which do not adhere to the Islamic principles. The primary feature of Islamic finance is socio-economic and distributive justice. Islamic finance must help in the development and the well being of the Islamic community.
Featured broker HotForex
HotForex complies with regulators and offers Islamic Forex account to traders of the Islamic faith. It also gives you free trading resources to help you make a better trading decision. HotForex offers you free Autochartist and Premium trader tools which can give you advantages in placing a successful trade. It can assist you in deciding on placing a trade. Open an account with HotForex now!
Islamic Forex accounts - Why is it important?
It is important that your day to day life should match with your religious beliefs, it gives you peace of mind. So when it comes to Forex trading, it should comply with your religious principles.
An Islamic Forex account, provided through an Islamic Forex broker is a unique kind of trading accounts which we don’t find with all brokers. The opening of an Islamic account is not restricted to Muslims traders only.
The traders of Islamic faith can open Islamic Forex Trading Account. These traders cannot receive or pay swaps (interests) for religious reasons. To enable many Muslims to take advantage of the Foreign Exchange markets benefits, many brokers made it possible for Muslims to trade in Forex with the help of Islamic Forex trading accounts. These specific accounts called Islamic Forex accounts. These are compliant with Sharia law enabling traders of Islamic faith to take advantage of Forex trading. These accounts offer NO SWAP for trades that remain open overnight. These brokers also have dedicated staffs for support and trading experts fluent in Arabic as well as the intricacies of Shariah law.
The only determining factor to the Islamic account is that the trader should be of the Islamic religion. These accounts are offered for all account types regardless of base currency or leverage offered. The brokers verify the trader before they provide them an Islamic Forex trading account.
Modern-day trading has gone a long way from traditional trading of goods and commodities, which were physically exchanged while doing business. Early traders of Muslim faith used to cross vast oceans and lands to trade all over the world. They were liked all over because their methods of trading are truthful, principled and dictated by the teachings of their faith. This tradition continues to this day.
Is Forex trading Halal in Islam?
The Islamic Forex trading community is divided on whether Forex trading is Halal or Haram. Making money by trading Forex is allowed because an individual has the right to improve his financial condition. Some Islamic Scholars agree that Forex trading adhering to Islamic principles can be considered as Halal, while some forbid it entirely.
To ensure that your Islamic Forex trading account is Halal, choose a Forex broker, who performs operations approved and permitted by Shari’a Supervisory Boards (SSB). The Islamic Forex accounts facilitate practitioners of Islam to engage in Forex trading, without breaking the laws of the religion.
We don’t have enough expertise or authority to advise you whether Forex trading is Halal or Haram, or is it allowed under Islamic principles. Hence seek appropriate guidance if you have any doubt as it involves religious sentiments.