Is Day Trading Haram or Halal? Islamic Trading Explained
What does Islam say about forex trading? Is it Haram or Halal in Islam? What does this religion say about online forex trading? Let’s find out.
First of all, forex trading is halal (lawful) and not Haram (forbidden) when traders use swap-free trading accounts as Riba or interest element doesn’t exist in that case. The vast majority of CFD brokers offer Islamic swap-free trading accounts that don’t charge or pay overnight interest on the open positions.
Generally, trading is not Haram, but do you know why?
You will find many questions related to day trading and Islam on the internet. For example, “Is day trading halal or haram” “Why is day trading haram” or “Is day trading haram in Islam.”
Trading is not Haram because:
- There is no interest element in trading.
- Moreover, trades are conducted “hand to hand” (Islam allows)
- Besides, currency exchange, commodities exchange, or stock exchange doesn’t offend against the tenents of Islam.
Halal or Haram, people choosing to do forex trading, night and day contemplate about their religion and what part of the Quran practicing Muslims should follow. There is no lack of opinions concerning forex.
Some Muslims believe they should follow the words of the Prophet Mohammed:
Gold for gold,
Silver for silver,
Barley for barley,
Dates for dates,
Salt for salt,
Like for like,
Same for same,
Hand to hand.
If the types are different for then sell nevertheless you like, it is hand to hand. People who read these words will trade. Nevertheless, another Islamic law states that usury or any contract or business dealing, involving, charging, interest is strictly forbidden (Riba).
Forex trading and Islam
Forex trading has no interest calculations to be added or deducted, so this law doesn’t influence Muslims’ decisions.
Whenever online chargers charge or pay the difference between the two sides of a currency pair whose position has been held overnight, a fee is not permitted.
According to people who adhere to Shariah Law, since the brokers are finding other possibilities to earn from the trade, they (Muslims) will not be involved in forex trading.
In the case of a regular spot forex trade where traders predict an increase in the value of currencies, as well as there is just regular trading, this could be seen as hand-to-hand. So, some Muslims won’t have a problem with this forex trading method. Still, there is an element of interest involved with forex trading forward, so this is strictly Haram (forbidden).
You need to keep in mind that forex trading is strictly forbidden in the case of non-Islamic accounts.
Islamic law clearly forbids gambling, which causes some people to wonder if the level of speculation that goes along with forex trading is acceptable for Muslims. Still, the exchange between the dealer and the broker would be hand to hand, allowed. Nevertheless, a swap in forex represents the interest that you either earn or pay for a trade that traders keep open overnight.
Islam and its position regarding online forex trading
Currency trading in Islam is permitted only if traders use swap-free accounts that don’t pay or earn swap or interest on trades, currencies as well as metals. But an Islamic forex account or swap-free account is a halal trading account because it is a swap-free account where Islamic trading accounts don’t pay or receive interest rates.
Another critical question is: What does Islam say regarding online forex trading? It understands that people need to earn, and some level of risk accompanies every trade, and Forex trading is not an exception.
Thus, when Muslims face many opportunities to earn, they will look at the experiences of the people involved in those opportunities in the past and research before making decisions.
Some believe forex trading is allowed when the correct type of analysis is used. Nevertheless, when traders can predict when a currency will increase, and another will decrease, and there is no speculation, they aren’t behaving like gamblers.
Still, traders who time the trade to get the best results can be seen as breaking Islamic Law as there might be some supposition being done by forex traders. Some people who practice Islam might prefer to stay away from forex trading altogether due to the above-mentioned factor.
However, the vast majority of Islamic traders use swap-free Islamic accounts based on the research in Saudi Arabia.
In the case of Islamic trading, forex trades should take effect immediately, which is regarded as an integral part of commerce allowed by Islamic law. People who practice Islam must trade with chart-based analysis or fundamental analysis. Hopefully, this will make forex trading permissible by Shariah Law. However, the regular chart-based analysis can be viewed as speculation, and it is not allowed.
Islamic forex brokers
Opponents say it is best for people who practice Islam to avoid forex trading because the line between speculation as well as knowing how to trade can be easily blurred, even though forex brokers understand the laws and are ready to trade on behalf of Muslims.
Nevertheless, trading without speculation is possible, making it perfectly fine for Muslims who are willing to do research and stay within certain boundaries. Moreover, it can be looked at as hand-to-hand trade that is permissible by the Shariah Law. Consequently, Muslims wouldn’t pay brokers to trade on their behalf.
Furthermore, many forex brokers have become Islamic forex brokers. They offer Islamic forex accounts that offer standard interest payments to make profits and trade.
Opponents are still saying Islamic forex makes this type of commerce problematic. It is no secret that the lines between gambling as well as smart trading or speculating can be blurred effortlessly, and avoiding forex forward can be a bit tricky to avoid at times. According to critics, Islamic forex trading is just a camouflage. Opponents believe Muslims can’t uphold Islamic laws and do forex trading.
Still, it is evident that Muslims aren’t paying much attention to the opponents, as Muslims know that each trader will be piloted by the Islamic laws they respect, and that is the most significant thing to take into account in the middle of this very complicated issue.
Why forex trading is halal
If someone asks you whether forex trading is halal or not? Feel free to say Yes!
Is driving a car halal? Of course, it is! However, if you exceed the speed limit, you might injure yourself and others around you.
Is forex trading a regulated business? Without a doubt, it is! Do banks, as well as other institutions around the globe, trade forex? Of course, they do.
There is a bigger chance to do insider trading in the stock market compared to the forex market. In the case of the forex market, there are no loans or market manipulation.
The good thing about the forex market is that you have the ability to risk 1% per your equity, and 99% of your money is in your pocket.
Questions about forex trading won’t disappear anytime soon. However, critics can’t tell if the Islamic laws are being upheld or not by Muslim traders. Eventually, opponents might see this as an issue they should stop discussing, as they can’t control other people.
People should keep in mind that forex trading is halal. It is legal in Islam because, generally, there is no interest element in trading. Nevertheless, some forex accounts have a small interest in trading when traders keep long-term trades during weekends. So, Islamic traders have to use swap-free accounts because any interest is forbidden in Islam.
Now we need to explain one vital topic. Do you know which?
Is day trading halal or haram?
As previously mentioned, forex trading is halal, but is day trading also halal? Hopefully, day trading is not prohibited. It is halal.
Trading size and other factors don’t affect the legality of trading. For instance, if you trade swap-free accounts in Islam, it is halal because there is no element of interest. Nevertheless, day trading can be risky due to overtrading, among other factors.
Besides, keeping forex trading alive is way more important than all words the critics are using at the moment. As long as people who practice Islam find ways to trade and are comfortable with their choices, there is no need to criticize them.
And the last question is about CFD. Is it halal? The answer is straightforward Yes! Trading CFD is absolutely fine as forex trading (forex and CFD trading are the same); however, only if you use swap-free trading accounts. The vast majority of CFD brokers offer Islamic swap-free trading accounts that don’t charge or pay overnight interest on the open positions.
Several tips for inexperienced traders
Apart from finding the best Islamic forex brokers that offer trading accounts, you can also utilize criteria to buy, sell, and trade securities, such as the following:
- Make sure that there are no interest payments attached to the investment product
- Abstain from engaging in contracts with excessive and uncertain risks
- Don’t invest in businesses or markets that participate in illegal activities
- Avoid investing or buying haram stocks
- On no occasion should you incorporate speculation or gambling into your investment strategy
In fact, utilizing halal trading can also protect your capital from unnecessary risk since you are being socially responsible, ignoring market volatility and intense fluctuations, and growing wealth in a sustainable manner.
The post Is Day Trading Haram or Halal? Islamic Trading Explained appeared first on forexinsider24.com.