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Forex trading haram is a term that means trading Forex for Islam followers is prohibited. Even though that trading in Islam is haram, they are allowed to trade FX. It all depends on the account and whether it’s halal or not. FX account is halal when Muslim traders are allowed to trade through the mentioned account.
In most cases, an Islamic account is mentioned as a swap-free account. So, if you see a swap-free account you should know that it’s allowed for Islamic people to trade and gain money through the aforementioned account. The main reason why trading in Islam is prohibited is that Muslims follow Sharia laws. Sharia laws are also known as Islamic laws. And here’s the question: why do the Sharia Laws prohibit trading? The main reason lies in the view that an Islam follower doesn’t have to have any interest to get profit from the given things. While trading means that you are selling or buying something to earn money, this process goes against the Laws of Sharia. For avoiding this kind of occasion in the FX market you come across the swap-free account, which is interest-free and therefore halal trading account.
In this guide, you’ll get more information about Islamic FX accounts, how they work what are their main advantages, what are their features, and what do they promise to their users.
An Islamic Forex Account Explained
Islamic Forex account is an interest-free account that allows Muslims to get involved in FX trading processes. As already mentioned above Islamic laws prohibit any kind of actions that are grounded on getting profits through giving.
Islamic Forex accounts are different from the usual Forex accounts. As regular Forex accounts allow people to buy and sell certain assets and instruments and get earned money, in the case of the swap-free account conducting processes are different. While through regular FX account traders are receiving interest rates, as long as Islam prohibits taking any interest rate, they are out of receiving any of it. Besides, Islamic trading account users are allowed to use Islamic finance and deposit and withdraw without delay. This means that the transactions are instant and are oriented to maximally save your time. What’s more, those users who are using Islamic accounts are not paying swaps and don’t leave the positions opened. Moreover, Islamic account users are having wider spreads, as well. And when it comes to commodity trading, Muslim traders can trade, for example, silver and gold, they are trading through the physical gold and silver.
As it appears, even though that the Islamic rules are prohibiting trading, Forex trading is possible through an Islamic account, which is not oriented on the interest rates. So, Forex trading for a trader of the Muslim faith is possible and allowed.
How Do Interest Rates work on the Islamic Account?
There is no question that there are many people, including Muslims who wonder whether it’s allowed for them to be involved in Forex trading or not, whether it’s Halal or Haram.
In the Islamic language, Haram is the thing that is prohibited by Islamic laws. When something is Haram, this means that a certain things or action goes against the Muslim faith and its dogmas. So, when it’s said that something is Haram, faithful Muslim people know that doing this is against their religion and is a sin. When a certain Muslim trades with a regular FX account, this is trading Forex Haram. However, as already mentioned there is another side, the opposite term of the Haram, also known as, Halal. Trading is Halal when the Muslim is using an Islamic account, where the interest rates are excluded.
In the case of regularly trading Forex, traders are leaving their positions open overnight, which allows them to get interest rates and make a profit. However, that’s not the case for Islamic accounts. When the user is using an Islamic account the positions are closed and aren’t opened overnight as well. The interest rate has nothing to do with the Islamic account. If there was an interest rate then trading Forex through an Islamic account would be against the Sharia laws. So, as long as Muslim people can’t get profit from their giveaways, the process is Halal Forex Trading.
What’s more, Islamic account users can keep positions without worrying about the changes that are taking place in the marketplace. For Islamic users, it has no crucial meaning whether the price changes in the FX market are drastically changing or not. This can be quite profitable. Because of this aspect traders can conclude, that in that case every currency that has negative interest rates are well-positioned for gaining and earning money. The occasion of the well-positions can be explained through the law inflation rate. While opening a long position through a regular FX account might be risky, because of the interest rate differentials, vital swap charges, and so on. So, the mentioned kind of processes can discourage traders to avoid trading through lower-yielding currencies. This may not be the case for those people who are trading every day and who are using scalping strategy and closing and opening their positions instantly. In contrast, for those people, who are going long and aren’t trading daily or aren’t closing and opening their positions every day, this can be unprofitable.
Some Muslim users have the question of whether day trading Halal or Haram, which means day trading whether day trading for Muslim users is allowed or prohibited. For those users, who enjoy swap-free trading accounts day trading can be quite beneficial. They are allowed to choose their position with major currencies and in contrast with the regular account users, they are advantaged of opening their positions instantly with major currencies. They don’t need to worry about opening and closing their positions daily and in addition, they don’t have to worry about instant price changes. Besides, if a broker decides to charge interest rates to swap-free account users trading will be prohibited depending on the Sharia laws.
Wider Spreads For Islamic Trading Accounts
As long as Islamic trading account users are profiting through swap-free accounts and swaps are one of the significant ways of gaining money for the brokers, there have to be done that will compensate for this loss. For that reason, brokers are usually using wider spreads for Islamic accounts, which allows brokers to get income from those users who are using swap-free accounts.
In the case of the regular account users, wider spreads can be unprofitable and may lead them to a significant amount of money loss. That’s because many of the traders are trading daily and opening and closing their positions frequently during the daytime. The scalping strategy plus the wider spreads aren’t profitable and may reduce their income. As long as the regular traders, especially those ones, who are oriented the wider spreads can be non-beneficial. Instead, as long as Forex trading legal in Islam allows Muslim users to trade through currencies, the mentioned problem cannot be the thing that will exclude them from trading FX. Because of the Islam accounts, that are providing traders with the swap-free feature, Muslim users can avoid a daily swap expense. The avoiding of daily swap costs and continuing daily trading with wider spreads of Islamic account users can improve their performance.
Trading Binary Options – Halal or Haram?
Trading binary options are one of the most viral ways of trading among investors. In most cases, they are enjoying the benefits they can get through that. What’s more, binary options allow them to make the trading process more thrilling and also strategic. Through binary options trading, they can get exotic currency pairs while trading. Until you get further information on whether trading binary options halal or haram, let’s say what are the binary options. One of the forms of options – binary options is based on a simple question: did a concrete type of instrument can reach over a certain price or not by a defined time period the expiration. To make it more clear, let’s take an example. Imagine a trader, who has been watching the price of gold for over a month, and even though its current price is $1100, he believes the price will rally and be over $1150 by the end of the week. With plain vanilla investing the trader would have had to purchase gold or gold alternative like an ETF or CFDs. However, with binary options, he can simply make a prediction on whether or not gold will be trading higher than $1150 by the week’s end without having to acquire the asset.
With binary options, there are only two possible outcomes at expiration – either the price of an underlying asset gold finishes above the specified price at the specified date and time or it doesn’t. At expiration, the value of the binary contract is $100 referred to is in all-or-nothing high-low scenario back to the trader. So the trader believes the price of gold will be above $1150 by the end of the week so he decides to buy some $1150 gold binary options. Contrarily if he thought the price of gold would reach $1150 he would do the opposite and sell $1 150 gold binary options. The trade price of a binary option ranges from $0 to $100 based on the likelihood that the asset expires in the money or above the strike price of $1 150. In this case, the likelihood of gold reaching $1 150 is 60% so the option sells for about 26 dollars. That likelihood is made of a few variables like how much the price fluctuates, volatility, the time until expiration, and the general market sentiment. The trader decides to buy five contracts at $60, so his initial cost would be $300. The maximum trade risk to possibly make a $200 profit. It all depends on how the processes will develop and whether the trader can get money earnings through that or not.
The above-mentioned example can be suitable for Forex trading and currency pairs. So, as long as the binary options mean to get benefits from the trading process is can be said that there is no possibility of trading binaries halal happen for Muslim account users.
How to Trade Commodities With Islamic Accounts?
One of the main things about Islamic accounts is that traders can trade with commodities. Commodity trading is getting more and more popular among traders nowadays, so Muslim traders can come up with the tendencies and trade with commodities, as well. Commodity trading means that traders are allowed to invest their money in commodities like silver, gold, oil, or other agricultural products. Through them, traders can get profit by investing their amounts of money in it. What’s more, it allows investors to trade through CFDs.
Those people who are using Islamic Trading Accounts can be involved in commodity trading, as well. Like currency pair trading, swap-free account users don’t have to worry about closing their positions every day. Instead, they can invest their money in commodities and go long or short. This allows traders to purchase physical commodities and diversify their portfolios. Even though that traders can choose between going short or long, going long through commodities can be quite beneficial for them. What’s more, like trading with currencies, Islamic account users are having wider spreads while trading with commodities.
How to Open an Islamic Forex Account?
The process of opening an Islamic Forex account is super quick and easy, First of all, you need to find the platform, which supports users with an Islamic reading account. Until you choose the platform you need to consider some factors, that will help you to choose the right one among the other platforms. One of the significant factors among others is the features, that are provided by a certain platform. After choosing the most suitable and trustworthy platform you need to register on a specific platform. While registration you’ll see a list of accounts, where there will be an Islamic Forex account, as well. You can start currency trading halal after several steps. You need to fill in the form with your information, after that, you’ll get a confirmation mail. After verifying it’s you, you can make your first deposit with thE preferred payment method and start trading.
Final Word
So, as you see depending on the above-given information, even though that there are some of the restrictions in an Islamic religion about getting interest rates, Muslim people still can trade FX. As already mentioned, Sharia laws are the laws, that are prohibiting to gain profit through giving or having expectations of getting earnings after giving something. Islam on Online Forex Trading has a negative view and considers it as a sin. However, swap-free accounts, Islamic accounts allow them to both follow their faith and be involved in Forex trading. Furthermore, Islamic FX account users have limitations on currency pairs and have wider spreads as well. In contrast, that doesn’t mean, that Islamic accounts aren’t useless or something like that. Instead, Islamic account traders don’t need to worry about opening positions. What’s more, through an Islamic trading account you’ll need to pay wider spreads, instead, you’ll be swap-free and that will compensate the income for the broker and for you, as a trader. So, to sum up, Islamic forex trading is halal. Muslim people can get involved anytime and start FX trading.