is forex trading gambling in islam
is forex trading gambling in islam
Is Forex Trading Allowed in Islam?Is Forex Trading Halal or Haram in Islam?
Is Forex Trading Halal or Haram in Islam?
is forex trading gambling in islam
Is Forex Trading Halal?Is Forex Trading Allowed in Islam | Halal or HaramIs Forex Trading Halal or Haram? | [HOST]
is forex trading gambling in islam
Essentially – yes, Islam does permit trading, but it must be done hand in hand. A 'hand in hand' transaction is a deal between a forex broker.
Is Forex Trading Halal?
is forex trading gambling in islam
Reading Time: minutes. This post is also available in: Indonesia. Muslim scholars have extensively debated the issue of whether Forex trading is halal. Many have made their views known in fatwas. In its current form, trading in Forex currencies using normal brokerages may be considered haram. We will explore the reasons for the argument against Muslim Forex trading. You will get to know how they work also. As the last religion, Islam provides guidance and instruction to practicing Muslims on the set of values they should adopt in matters to do with their economic, social, and personal conduct. Under Sharia law, the taking or charging of interest riba is prohibited, and this is the consensus regardless of the Muslim scholar you consult. The Quran makes a point of mentioning the prohibition of usury. The Forex broker charges a margin interest to the trader to use their loan money to enter and close positions worth far more than their account balance. In addition, positions held open overnight are subject to a rollover interest fee. Read more about Forex Leverage here. Therefore, regularly trading on normal Forex accounts used by general users may go against the prohibition of charging interest. It is permissible to exchange one currency for another as long as it meets certain key requirements:. Since you can exchange gold for silver, you can exchange currencies, such as the USD with the Japanese Yen , as long as both are spot on the spot transactions. Is there any problem if you profit when making Forex exchange transactions? Just as you may purchase an asset only for its market value to increase is the same way you may acquire a currency only for its value to increase, leading to profits when you dispose of it. Purely exchanging one currency for another is acceptable, but the nature of Forex markets that deal with contracts for differences results in a conflict between scholars. In Islamic finance, there is the concept of Gharar. The word translates to hazard, chance, or risk. Muslims are taught to limit Gharar or unnecessary risk to their investments. Consequently, gambling is banned in Islam. When you lose, someone else takes all the profits without the equal sharing of losses. Trading on the Forex markets does not strictly adhere to the definition of gambling. We can illustrate this point by considering a trader who has learned all the tools and knowledge to make informed trades that carry low risks. They have developed their skills and refined their understanding of the market such as the correct way to trade exotic Forex pairs. Expert Forex traders are known to utilize fundamental and technical analysis so that they remain profitable. The trader who undertakes a quest to learn all about trading reduces the element of speculation in the Forex market. We must also recognize that businesses, in their fundamental nature, create and assume risk to make profits. The trader who accurately identifies the needs for a certain type of goods such as carpets and undertakes to fulfill this demand may profit or make a loss. The prosperity created in life is brought about by solving challenges through our God-given intelligence and skill. There have been proven businesses undertaken for thousands of years. Forex trading, though not fully accepted and novel, provides new avenues for Muslims looking to diversify their investments. Bitcoin was recently considered permissible after an extensive study conducted by Mohamed Abu-Bakar of Blossom Finance, Indonesia. Bitcoin and other cryptocurrencies do not strictly adhere to the concept of money. So, why are they deemed permissible? Do all authorities consider them compliant with Islamic finance laws? Starting with the first question, Bitcoin meets the guidelines on ownership. You can have bitcoins in your wallet and use them for transactions. Unlike major world currencies, bitcoin is not based on any debt. Rather bitcoins are created through the mining process that requires time and resources to be invested. However, the bone of contention is that it exists virtually on the Internet with no physical form. Well, this may also be said of the present nature of money where your bank account is not a vault stacked with paper money with a defined gold value, but digits on a computer screen. The study also specified that while bitcoin is generally compliant with Islamic finance laws, its legality is based on the specific country laws. In Egypt, bitcoin was initially banned by the government but the decision was later revised. After the restrictions were eased, companies engaged in cryptocurrencies were required to acquire licenses from the Central Bank of Egypt. What about the issue of trading by speculating on the value of bitcoin? The ruling may follow the consensus on trading Forex currency pairs. When it comes to the element of risk, individual traders should seek out as much knowledge as possible to limit the risks they expose to their assets. Stock trading can take place in two ways. You can buy stock in a company and hold the shares until their value increases before selling for a profit. Your shares have an actual tangible value. But Muslims should not just buy stocks from any companies. The companies in question should not engage in any forbidden activity such as gambling, pornography, or the charging of interest by banks. Some scholars have ruled out investing in stocks completely or speculating on their price movements when traded as contracts for differences. Millions of traders participate in the Forex market through Forex Halal Islamic accounts. They have some unique properties not found in regular accounts. Brokers offering Islamic accounts operate under scrutiny to ensure they conform to Islamic finance laws pertaining to the charging of riba. Other than their interest-free nature, all other aspects remain the same including the provision of leverage for trading. Transactions take place on the spot with funds transferred immediately. While the accounts are interest-free, some brokers will impose higher spreads. You may deposit more money towards your account balance than in conventional accounts. You may or may not be required to supply evidence of allegiance to Islam. Uncertainty and risk still apply to Islamic accounts. Our suggestions are tailored to your country. If you are you in a Muslim-majority country, we have you covered. Just take a look at our Forex trading in Indonesia guide for further details. We can conclude by stating that there still exists a grey area when it comes to speculating on the price movements of different financial instruments such as currency pairs, cryptocurrencies, etc. However, there is a lack of a general consensus on whether Forex trading is permissible due to the risks involved. Many traders just rush and start trading using real money before they understand how the Forex market works or how to become profitable. Taking this route is a sure way to lose your account balance. Freddie North. Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. Check our help guide for more info. Share 0. Tweet 0. Is Forex Trading Halal? Parts of Is Forex Trading Halal? Is Forex Trading Halal: Discussion Under Sharia law, the taking or charging of interest riba is prohibited, and this is the consensus regardless of the Muslim scholar you consult. Read more about Forex Leverage here Therefore, regularly trading on normal Forex accounts used by general users may go against the prohibition of charging interest. It is permissible to exchange one currency for another as long as it meets certain key requirements: One sitting: The transaction has to take place immediately with one currency being handed over and the other currency being received by the other party. There is an emphasis on spot transactions. Hand to hand: Transactions involve parties dealing with each other with no intermediaries that receive goods on behalf of the other with the intention of profiting unscrupulously. Equal values: Gold for gold, silver for silver, but gold can be exchanged for silver as long as both have perceived equality in the quantities and values exchanged. Is Bitcoin Haram? How to Trade Bitcoin: Step-by-Step Startup Guide to Profitability Rather bitcoins are created through the mining process that requires time and resources to be invested. Is Stock Trading Haram? So, how do brokers make money for facilitating transactions on swap-free accounts? Where Can I find Islamic Accounts? When choosing an Islamic Forex broker, you should pay attention to certain factors. Cost: Look out for the most favorable account charges, and we recommend that you compare several providers. The time allowed to hold positions open: Check for the maximum time allowed to hold positions open without any charges or interest. Some brokers provide 2 days, 7 days, etc. Leverage: Consider the amount of leverage offered and recognize that while leverage allows you to make sizable profits from a small account balance it also increases your risk. Licensed: Ensure that the Forex broker is licensed to offer services in your country and provides sufficient deposit and withdrawal methods. Is Forex Trading Halal or Haram? Final Verdict We can conclude by stating that there still exists a grey area when it comes to speculating on the price movements of different financial instruments such as currency pairs, cryptocurrencies, etc. Click to rate this post! Related Posts. AvaTrade or eToro? Top 3 best Momentum trading strategies. Market Structure Forex. Close dialog. Session expired Please log in again. Please wait while you are redirected to the right page Please share your location to continue. English Indonesian. If the Forex system involves leverage or margins, then it is haraam, because this is combining payment in advance and brokerage. This has already been discussed in the answer to question no. If it involves margins and rollover fees, then it is even more emphatically haraam, because it is combining payment in advance and brokerage with riba-based loans. Please see the answer to question no. If the transaction is free of the things mentioned above, and a person deals with his own wealth only via the Internet, then that is permissible, subject to two conditions:. See the previous reference, and the answers to questions no. The Islamic Fiqh Council in Jeddah, no. At that point, the seller pays the difference between the current price of the underlying asset and its price when opening it for the purchaser. That applies if the value of the underlying asset has risen. In the event of the opposite, if the value of the underlying asset has dropped, then the difference between the current price and the original price is negative, in which case the purchaser pays the difference to the seller. This is in addition to the fact that the Islamic Forex account on the website includes leverage, so it is haraam, as noted above. In and of itself, currency exchange sarf is permissible, as long as certain conditions are met, such as the transaction be done hand-to-hand without delay. However with respect to forex trading in particular, Mufti Taqi Usmani — leading contemporary Hanafi scholar and Islamic finance expert — believes it to be impermissible, due to various problematic elements associated with this form of trading. It is not permissible for you to invest the money in these companies that you mentioned in the question because of the forbidden matters in their dealings, like the Mudhaarib i. In addition to this, currency trading via the internet includes many prohibitions. For more benefit, please refer to Fataawa , and In my view, majority of the retail forex trading platforms do not satisfy the Shariah compliance requirements and are therefore not Shariah compliant. Retail conventional Forex trading, where individuals are merely speculating on currency pairs, is non-Shariah Compliant. What is more important and crucial to determine is whether there is actual trading and exchange of currencies in Islamic FX products. After reviewing dozens of materials and speaking to a number of Forex brokers, I am of the view that retail forex practiced by private investors and speculators is a form of non-deliverable trading agreements, where delivery of the currencies never takes place. In speculative trading, nobody actually wants to do the currency exchange, so at the end of each day, to avoid the exchange in two days, they offset their open position, and then re-open to start the new trading day. The carry is the difference between what you pay on the loan and what you receive on the deposit. When you close out your trade you reverse the process. Some brokers handle carry separately, while some incorporate it into the position rollover. Thus, in retail forex, there is no actual trading of any currency. The entire industry is speculative. There are multiple products offered by conventional brokers in non-deliverable FX trading such as:. There is gross Gharar uncertainty in forex trading. The outcome of the open position where money has been staked is subject to Gharar. This Gharar is in the interim of a transaction and a component of the actual trade. This is different to purchasing shares, as one actually purchases a known subject matter. The transaction of purchasing shares is therefore free of Gharar. Uncertainty in shares is therefore ex-post, whilst in FX trading it is ex-ante and during the trade. Further, an FX trade does not involve any valid Shariah compliant commodity. One is taking a position on the movement of a currency pair. This is a Qimar gambling transaction as one is staking his wealth against his broker. The one who speculated correctly makes a profit at the expense of the other. In futures transactions, because neither counter-value, is present at the time of contract, it is a mere exchange of promises. Futures trading, where both counter-values are deferred, is exchange of one debt for another, i. The deferral of both counter-currencies results in a deferred transaction. Deliverable Forex, which is open to companies and big firms, is different. In deliverable FX, there is actual trading of currencies. Deliverable FX has the potential to be Shariah compliant if other requirements of Shariah are fulfilled. We have previously written extensively on forex here and here. This writing is shaped by experience of working with forex companies as clients during our previous careers as lawyers. We would strongly advise against getting into forex for Muslims, but also for non-Muslims due to the deep risks attached to it. Forex is at heart a financial instrument as opposed to dealing in the currency itself and for it to be worthwhile there is leverage involved. Most people who engage in forex lose money — and they lose it to people like eToro and other providers who can make money off losing trades. If you would like to learn more about each investment and how to structure your investment strategy - check out Halal Investing Course here. In regard to Vantage FX, I had discussed this matter with them and their Shariah board a few months ago, they gave me the following reply:. With regards to your specific queries, we can confirm all the laws and principles of Bay al-Sarf are applied to all transactions including that of Milkiyyah and Taqabudh. This is done via actual liquidity providers through operational mechanism approved by the Shariah Board. Vantage FX serves as the agent Wakeel on behalf of the traders to manage the actual liquidity provided by the liquidity providers and such funds are segregated in a specific bank account. All the trades are executed in real time and have a direct effect on the real market. That is a matter for you to consider. Jazakallah for the reply. From what they have mentioned in their Q and A, does it appear to be Sharia compliant? I have been enquiring alot from vantage FX about what they offer but due to my ignorance in this field, I am unable to judge weather it is permissible or not. I believe more transparency is required on how things actually work. The processes are still obscure somewhat. That is not due to doubt in the Shariah scholars at all, but just that the level of curiosity is very high in this structure and therefore Vantage should provide as much as transparency as possible. I researched a broker called fp markets very deeply and talked to them, and they gave me the following answer:. According to Islam, gambling is prohibited but trading forex and other financial instruments can be considered an educated game of chance which involves the buying and selling of assets based on forex market analysis and using a variety of concepts and trading strategies. Usually, when a trader holds open positions at the close of a trading session, FP Markets charges a swap commission linked to an interest rate which is in turn related to the fact that traders receive an indirect loan through leverage. This leverage usually results in profit for the forex broker and therefore why a standard trading account is classified as haram given it includes interest payment whereas an Islamic trading account would be halal as it does not feature payment of these swap interest rates and therefore satisfies the riba threshold. One of the principal concerns about trading is the element of shared risk. Interest ensures a reward for the lender and the borrower is the one who incurs the risk. Excessive or a high level of risk gharar is prohibited in the same way that excessive gambling is. Financial activity must also be seen to promote social and economic activity and justice as well as happiness. With an Islamic trading account, all interest charges are waived. In times gone by this meant face-to-face but in the modern world and with the advent of online trading and e-commerce, which involves an almost instantaneous transaction between broker and trader executed in seconds, is considered halal under Shariah and is therefore permissable. Fatwa: Is forex haram or halal? A comprehensive fatwa compilation Islamic Finance Fatwa. This is iA the most comprehensive resource for this question on the internet. Forex trading permissible with halal broker. Thoughts regarding Shariah compliant trading accounts. Welcome to the IFG Forum. FP markets Forex trading. They have a FAQ towards the end of this link explaining why it is permissible. I would appreciate it if you would look into this and clarify. Assalaamu alaykum, we pray you are well. You are welcome to contact us should you have any further queries. For more information on Forex, kindly see:. Assalaamu alaykum, I believe more transparency is required on how things actually work. I researched a broker called fp markets very deeply and talked to them, and they gave me the following answer: About Halal Forex Trading - Halal Trading with Islamic Forex Accounts Islamic finance is guided by four basic principles: 1 Prohibition of gambling According to Islam, gambling is prohibited but trading forex and other financial instruments can be considered an educated game of chance which involves the buying and selling of assets based on forex market analysis and using a variety of concepts and trading strategies. Assalamualaikum in one word please answer me in Islamic view Forex halal or haram? Conventional, retail, non-deliverable Forex is not Shariah compliant.