Islamic Forex trading is a specific type of trading for individuals of the Islamic faith.
Islamic Forex trading accounts, which transpired after heightened interest by followers of the Islamic faith to access the Forex markets, have become extremely popular over the past decade.
They ensure that traders are able to trade Forex while being fully compliant with their religious beliefs.
The Laws on Trading According to Islam
In accordance with the Islamic faith, gambling of any sort is entirely forbidden, in addition to trading in risk.
This is specified in the Quran, stipulating that any excessive uncertainty is completely prohibited.
Due to the nature of Forex trading, where a certain level of risk must be taken in order to generate a successful trade, traditional online Forex trading is completely forbidden.
Islamic Accounts for the religion
However, trading in accordance with the Islamic faith is achievable thanks to a number of factors that an Islamic trading account takes into consideration.
First of all, Islamic accounts do not charge interest on overnight trades.
Interest or swaps on overnight positions are also known as RIBA and must not be charged in accordance with Islamic conditions.
As a result, all positions that remain open after midnight do not gain or lose any money, irrespective of the volume of their position.
Further still, Islamic Forex trading does not allow leverage, and consequently, Islamic trading accounts prohibit traders from applying leverage to increase their returns on invested income.
The profit and loss generated in the trader’s Islamic account must be shared, as in accordance with Sharia law, a Musharakah, or joint venture, which has been entered into.
Thus, any Muslim trading Forex is obligated to divide the profit and loss with their selected Forex broker in a pre-established ratio.
Finally, all Islamic Forex trading clients are obligated under Islamic tradition to make a compulsory payment for religious or charitable purposes.
The payment, known as Zakat, must be made on an annual basis.
All of the above factors enable Islamic followers to trade Forex while simultaneously abiding by their personal religious beliefs in accordance with Sharia law.
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