Is Forex Trading Halal or Haram in Islam? - TopAsiaFX

014, Sep 2021

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Is Forex trading forbidden in Islam?

Can Muslims trade Forex and CFDs?

Is Forex Trading Haram or Halal in Islam?

While the answer is complex, the one answer we have concluded here is: Yes, Forex trading is Halal and CFD trading is halal if you have made a real business out of it. At the same time, we can tell you that Forex trading is Haram, yes Forex can be 100% haram if you are driven by greed and gambling sensation for a quick catch.

Trading Forex is Halal if you treat trading as a business where you calculate your risk of investment with proper risk/reward expectations. Do not treat trading as Gambling, do not trade with Swap accounts, and make sure that you do not violate any Islamic Religious laws.



We have done our research and will do our best to help you answer that question today.

Is Investing in Forex Halal?

Let’s make it clear, we're not a religious people, neither We're Islamic scholars. So, to find our answers to these questions we had to do proper research. Thus, we took this opportunity to learn from Islamic Scholars, get their opinion by asking them ” Is Investing in Forex trading Halal in Islam?”

So, let’s get some of these questions clarified.

What is Haram?

When you ask what haram is, different people give different definitions. But here are some of the most common answers we got.

Yagub (says in Turkish –  Hoca efendi, islam dininde haram ne demek?):

“Dear Mufti, what is Haram according to Islam?”

MuftWe(says in Turkish):

“Haram is something that you should not do at all, no matter what. Haram is something that Allah (God) and the Prophet (SAW) have completely and specifically forbidden. It is that act or matter would be considered as unclean and indecent.”

A few other experts told me that Haram is an act that is evil or sinful, which makes sense.

Haram trading types in Islam

There are certain trading or financial transactions that are certainly haram in Islam. Here are the 4 types of trading that are haram in Islam:

  • Riba is Haram in Islam – when interest is charged from the buyer under different conditions.

  • Pledge on loan is Haram in Islam – when you sign a commitment for a loan to pay back within a limited time where the loan provider can sell your contract to recover his/her loan if you are unable to settle the loan or its interest.

  • Loans with interest  – this is the money you get from a borrower with interest in it.

  • A short Selling trading strategy is Haram in Islam– borrowing and selling an asset that you don’t own to profit is also haram in Islam.

Is Forex Trading Haram?

So, first, we did our best to understand what is Haram. Our next goal was to understand if Forex Trading is halal or haram in Islam. Why do many people consider Forex Haram, while so many people consider Forex Halal and make a living on Forex as an industry?

We started to ask ordinary people and religious leaders:  “Is Forex Haram? If yes, why? If not, why not?”

Plato once said “Human behavior flows from three main sources: desire, emotion, and knowledge”

Most of the Forex-hating people replied to me that Forex is Haram. So, we pushed them for our next answer. Why is Forex Haram?

Common answer: Forex is Gambling and Gambling is Haram in Islam.

After so many discussions with those Imams, Prayers, and active religious people we came to the following common agreement.

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Is Forex Trading Halal?

The question of whether Forex trading is permissible under Islamic law is a difficult question to answer conclusively. While Islamic authorities certainly agree that Forex trading under certain conditions is halal (i.e., permissible according to Islamic law), there is some controversy as to exactly what conditions.

Sharia laws prohibit the acceptance of specific interest or fees for money lending (known as riba or usury), whether the payment is fixed or floating.

Forex trading in Islam must have an immediate effect so that it can be a natural part of trading that is permitted by Islamic law. Therefore, Muslims must conduct their forex trading based on fundamental and technical analysis.

However, all Muslim forex trading accounts must uphold Islamic laws. Usury, involving the payment of interest, should be avoided and should not be considered gambling.

When we talk about whether forex trading is halal or haram, it is very important to consider that forex trading is an activity that must be done very consciously and in the best possible way. In reference to forex in Islam, each trader must always comply with the rules that his religion raises.

Therefore, the doubt for those who wish to be forex traders and belong to the Islam religion must be resolved when we consider that the forex is either haram or halal depending on how it is done and under what entity we do it.

Doing business is Halal, how do You Trade Forex Halal Way?

Trading Forex should be treated as a business. If you are starting a business, as an entrepreneur you will be risking your investment with the hope or perhaps expectation of making money later. Essentially speaking if something wrong happens (in startups case 90% of the new businesses) you will lose your money and your business will fail.

However, the risk of doing business does not hold innovators backward. In fact, the riskier the economy the more startup attempts we can see.

(الغنم بالغرم)

The right to profit belongs to whosoever bears the risk of loss.

So, as a trader, you can take a similar approach to establish a new business. Let’s go through the details below. 

Forex is Halal IF

Forex is Halal if you are not gambling and have your end goals distinguished.

1- As a Forex trader you need to have a reason to take action in the market (sell or buy);

2- You can not gamble on the trend direction but analyze the market;

3- You can not trade for the sake of excitement. Treat the market as a real business, trade for the potential income, and make a living;

4- Do not approach it as a game but as a job;

5- Have a mindset to win or to protect your equity;

6- Do not tell yourself “if we win otherwise next time”;

7- You have to learn from your losses.

8- Do not revenge trade! Move on with your loss-making decision, rather than blaming the market or blaming the situation

9- You must have a SWAP free account or trade avoiding SWAP

 

So, is Forex Halal or Haram?

There is a thin line between trading and gambling. We all must admit it. But the good news is that you can avoid being a gambler.

1- Only take trades with a high probability of making a profit based on your analysis;

2- Exiting a trade is as just important as entering one, have a trading plan;

3- Define your stop levels, maybe use trailing stop loss?!

4- Choose the right entry size, you are gambling if you are risking all to double it;

5- Know what you are trading;

6- Understand the time frames – addiction is a sign of gambling;

7- Backtest your strategy and aim to develop it;

8- Constantly review your historical performance and try to understand why you made loss and profit;

9- Be disciplined, trading is a job, not a game;

10- Focus;

11- Trade with an Islamic account providing Forex Broker;

Is Forex Trading Gambling?

Forex trading has always had big fans and also big detractors. At the level of Muslim law, these contradictions are based on whether forex trading is halal or haram. The truth of the matter is that many people consider forex trading to be gambling.

After working in the Forex industry for some time now, the answer we can give you is that forex trading is not a game. Is forex trading gambling? No, it is not if you do it in the proper and professional manner that is required.

Therefore, our advice so that you can take your forex trading halal is always to follow these tools:

  • Discipline

  • Strategist

  • Understand the market

  • Self-confidence

  • Define yourself as a true investor

  • Have the ability to manage money

  • Get good training with trading books

  • Run your operations without emotions

  • Take your trading with great responsibility


We can conclude then that in order to say whether forex trading is halal or whether forex trading is haram, we must consider how we conduct it.

Finally, we can say that people are finding more creative ways to do forex trading halal, and without complications under Islamic laws. Also, there are more and more professional people who are determined to do forex trading halal to get rid of the criticism about forex trading haram. We can also conclude that forex trading is not gambling.


Note:
The above is a part of our discussion with 2 Islamic scholars from Azerbaijan, 1 from UAE, 1 from Indonesia, and 1 from Egypt. Forex trading being halal or haram as a subject is debatable, please feel free to comment your thoughts below in the comments section. Or please use social media to reach out.

Best Swap Free Forex Brokers Account

In Islam, forex trading may be considered haram or proscribed by law, however, it is possible to operate halal forex trading if you find an Islamic forex account that facilitates swap free forex trading, and that has been designed for people whose beliefs prohibit them from paying or receiving swaps or rollover interest on overnight positions and that may be in line with Sharia law.

Many swap-free forex brokers offer the possibility of opening an Islamic swap-free forex account. The best Islam accounts are initially designed for traders of the Muslim faith, but can also be used by other traders. In these accounts, the broker usually compensates for the absence of the swap commission with other conditions, such as replacing it with a fixed commission).

We are going to answer the questions below about which is the best broker to get an Islamic forex account? and What are the best options to have swap-free forex
accounts with Islamic law?

 

Best Options to Have Swap-Free Forex Accounts with Islamic Law

When we refer to which are the best swap-free forex trading accounts, after a strong investigation, we can mention below which are the best forex brokers for Islam law:

XM Broker

This broker has special accounts that respect the laws of Islam, so it is a broker specialized in swap-free accounts. XM is an online CFD and FX broker whose parent company is Trading Point Holding which was founded in 2009.

The broker is regulated by the Cyprus Securities and Exchange Commission (CySEC/120/10), the Australian Securities and Investments Commission (ASIC 443670), and the International Financial Services Commission (000261/106).

Broker advantages
  • Low stock CFD and withdrawal fees

  • Easy and fast account opening

  • Responsive customer support

  • Low minimum deposit

This broker manages trading accounts with exceptional trading conditions, as each trader has the possibility to trade with micro or standard lots according to his preference. Also, regular and free market updates and excellent technical analysis are great tools that traders can use to improve their profits. Likewise, this broker has a multilingual customer support and a personal account manager who can efficiently help you with any questions you may have.

Tickmill Broker

Tickmill is licensed and regulated by some of the most reputable authorities in different parts of the world hence its global reach. Tickmill is a global provider of financial services with a prime focus on CFDs on Forex, Stock Indices, Commodities and Bonds as well as Futures and Options.

 

Classic Account
  • Minimum deposit: $ 100

  • Spread: 1.6 pips

  • Maximum leverage: 1: 500

  • Commissions: Zero Commissions
Professional Account
  • Minimum deposit: $ 100

  • Spread: 0.0 pips

  • Maximum leverage: 1: 500

  • Commissions: 2 per side per 100,000 traded
VIP Account
  • Minimum deposit: N/A

  • Minimum balance: $ 50000

  • Spread: 0.0 pips

  • Maximum leverage: 1: 500

  • Commissions: 1 per side per 100,000 traded

In summary, we can say that Tickmill provides top-quality trading products and services with transparency and innovative technology. Forex Islamic account of this broker is known as a swap-free account as there is no swap or rollover interest on overnight positions, which is against the Muslim faith.

Islamic accounts have exactly the same trading conditions and terms as regular forex trading account types. The only difference is that there are no swaps on forex trading instruments, however, a handling charge applies for holding several trading instruments overnight for more than three consecutive nights. Source.