Is Forex Trading Halal or Haram?
Is Forex Trading Halal? It’s the question on many Islamic forex traders’ minds. While most Forex brokers now offer account holders an option to trade under Sharia compliant accounts, many Muslims still find themselves questioning whether Forex is in fact, undoubtedly halal.
This confusion is due to misconception regarding how money is traded, the word interest popping up a lot, as well as a lack of knowledge of how Forex trading actually works and what the traders’ role is within it.
The Prophet (PBUH) said “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, same for same, hand to hand. If the types are different then sell however you like, so long as it is hand to hand.”
Lining up your trades and organising them to make a profit is very similar to any other type of business structure or commodity trade, wholesale, or resale, the difference here is that it is done with currency as the commodity rather than an actual physical stock. Forex trading would tie in with the Hadith quoted above as it is ‘currency for currency’ just as ‘Gold for Gold’ is.
There is nothing Haram about making a living for oneself, as long as it is done with compliance to Islamic Law. Merchants for example purchase stock at wholesale values, then resell it to make a profit for themselves, like trading, profit is not haram.
Forex brokers are no different than any other business that purchase and sell for profit and this is why forex trading in the Middle East is exploding in popularity.
It Forex Trading Gambling?
Gambling under Sharia is defined as:
“The agreement between participants based on immoral inducement provided by entirely wishful hopes in the participants’ minds that they will gain by mere chance, with no consideration for the possibility of loss.”
Forex Trading is a complex analysis of the currency market, it’s purpose is to purchase equity, then protect and grow that equity. This is far from gambling as none of it is gained by mere chance or wishful thinking. (even if one was to make the error of wishful thinking they will learn very fast that Forex isnt the right place to ‘play’ with money). The objective is to study the market and make an educated decision on when to buy and sell.
Trades are not earned by chance.
What About Interest (Riba)?
Islam has a clear stance on Interest, it is forbidden to pay or gain interest on money, however this problem is entirely avoidable – Forex Brokers only charge interest if a position has been open for more than 24 hours. Day trading eliminates any risk of interest as Forex brokers will only ever apply interest if you keep a position open for more than a day. However, if you want to take that extra step and Trade without having to worry about closing your positions every day, there are reputable brokers who follow the Sharia guidelines and will never charge or pay interest swaps.
You can always inquire with Brokers and read their terms in conditions to make sure they align with your beliefs. Overall Forex Trading is not an immoral game or scheme, it takes a lot of hard work, discipline and smart thinking to be a successful trader.
Make Sure Your Forex Trading is Sharia Compliant
Now I have broken down the stigma of Forex being haram, I’ve hopefully answered is forex trading halal and given you peace of mind in your forex trading. As an Islamic forex trader, you simply must make sure that your forex broker is Sharia compliant. Make sure you use one of the buttons below to sign up to an account with our award winning, best Islamic forex broker and avoid any problems that you might possibly face with using another forex broker.
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This post has been written as a guest post by Abu Ahmed, a forex trader and market analyst based out of the UAE.