Trading in the forex market involves more than trading currency. It also consists of creating and carrying out different types of contracts when using futures, options, interest dealing, and more — prohibited actions in Islam. However, making a profit from exchanging currency is permissible.
This makes coming to a unified conclusion on “Is forex trading haram or Halal?” so difficult.
Some people believe that the principles of forex trading are in line with Islamic teachings, while others believe it goes against its teachings. Below we explore both perspectives and come up with a potential solution that allows Muslims to trade on the market without disobeying the laws of Islam.
Is Forex Trading Haram?
The discussion surrounding whether forex trading is haram or not is complicated. Principles in Islam emphasize fair trading in business transactions and discourage any dealings that can negatively impact any person involved in the transaction. Exchanging different types of currency and making a profit from it is permissible, but navigating the forex market is more complex than simple one-way deals because of the risk.
Forex trading brokers have other duties besides investing. Forex brokers connect investors with banks so they can borrow money for their investments. They also can use futures, options, and other contract dealings that are considered haram.
The forex market involves a lot of speculation that has given it an association with gambling, another haram activity. Investors use a variety of strategies to anticipate the movement of the market to increase the likelihood of making a return. They watch the change in the value of different currencies without owning, buying, or selling the currency they are speculating on. This stirs up questions about whether or not it’s permissible to engage in the foreign exchange market.
Is Forex Trading Halal?
The Forex market allows individuals to make a profit when they buy or sell currencies at different times using an online platform. Forex trading can be halal, but specific guidelines must be met to keep it halal. These guidelines include:
- A contract and an exchange have to be made at the same time. This prevents there being any time between making the contract and making the exchange, making the transaction permissible.
- Money borrowed with interest can’t be used and can’t incur interest. This rule exists because interest dealing is prohibited.
- For forex trading to be considered halal, the currency used in a transaction can’t be shorted. Short selling is when making transactions with an unowned asset. This is forbidden.
If these guidelines are broken, the exchange or transaction is no longer halal and can become haram.
Forex Trading and ISLAM
The Quran states in aya 2:275 that “Allah has permitted trade and forbidden usury.” But not all trade is allowed in Islam. The Qur’an prohibits gambling (maisir, games of chance involving money). While the Quran does not specifically mention gharar (risk), several hadith prohibit selling products like “the birds in the sky or the fish in the water”, “the catch of the diver”, or an “unborn calf in its mother’s womb”. These have been called bayu al-gharar (literally “trading in risk”, defined as sales in which gharar is the major component)
Islamic forex account
If you are a Muslim we recommend you to open swap free islamic forex account that aligns with Shariah principles.
Based on our market research, Pepperstone broker offers one of the best islamic forex accounts with zero minimum deposit requirements and low forex spreads.
The Final Verdict – Is Forex trading Halal or Haram?
Coming up with one concrete answer can be difficult because many factors need to be considered to determine if this type of trading is halal or haram. Some guidelines can be followed to keep it halal. Still, the intricacies of Islamic principles and the foreign exchange market can easily make a transaction haram, even if it’s done by accident.
Many people lean toward the view that it is not permissible, but there are ways to follow Islamic guidelines while making exchanges on the market. Not all trading accounts involve interest and gambling. These are the types of platforms and accounts to use when looking for Muslim forex accounts.
What Can Be Done for Muslims Wanting to Get Involved with Forex?
One solution to help Muslims follow the principles of Islam is to open Islamic or Muslim forex accounts that don’t involve gambling, trading with interest, or assets involving futures, options, and other trade options that are not permissible.
These types of accounts are also called swap-free accounts. These trading accounts are halal because they do not accumulate, collect, or pay interest. They also do not include the use of futures and contract types that are not permissible. All exchanges take place without time in between to keep each trade in line with halal guidelines.
Using an islamic forex account like Pepperstone will reduce the risk of being charged overnight interest or creating situations that will make a trade haram. Not everyone will agree on the stipulations that determine whether forex trading is halal, but some guidelines can be followed to remain faithful.