Introduction
Muslims must follow a variety of laws and conventions in order to maintain their legal status whether in trading or in general. They have to follow a variety of rules according to the guideline of their holy book–The Qur’an. Among other laws and restrictions, Muslims are not allowed to take or give any kind of “Riba” which is the Arabic word for interests. When trading forex in a regular account, there are various fee structures or interests that a trader needs to pay to the broker including commissions, swaps, etc. However, any form of interest is strictly prohibited according to the rules of Islamic finance. The main reason behind this thought is that Islam views interests as an unfair practice.
So does that mean Muslims can’t trade forex? No, that’s not true. By enabling their clients to open an Islamic forex trading account that offers interest-free Forex trading, several forex brokers give Muslim traders the choice of trading forex in accordance with Sharia law. There are no interests or any kind of riba in such accounts. In such accounts, trading accords with Sharia law, which makes it permissible and the money made is entirely halal.
Islamic Forex Accounts
Islamic Forex Accounts are swap-free accounts that forbid taking or offering interests such as swaps. This type of account is especially designed for Muslim traders who strictly follow the guidelines of Islamic finance. Islamic trading accounts are also known as Halal trading accounts which help Muslims to trade without paying any interest or commission. This way, Muslims can get involved in the forex market without worrying about any riba.
Swap-free forex accounts make it possible for traders from all over the world to engage in forex trading and generate income in a halal manner without violating any Islamic finance principles or offending anyone’s religious beliefs. However, if you trade with the Scalping strategy then you can keep trading with your standard account. That’s because there are no overnight positions as scalping is a short-term strategy and hence there are no riba or interests. For traders who trade with long-term strategies, Islamic forex trading accounts are mandatory for Halal trading.
Advantages of Islamic Forex Accounts
- The most significant advantage of Islamic trading accounts is that Muslim traders do not have to worry about haram money. All the transactions are completely halal.
- For those traders who often open positions overnight or longer, this trading account will save them a lot of money as there are no rollover fees.
- No need to pay any additional sum for opening Islamic accounts, they’re free.
- Muslims are free to commerce without violating their morals or beliefs.
- All transactions are riba-free hence they are approved by the Shariah Law.
- There is no need to worry about the interest rates of various currencies. As all these fees are excluded from the account, Muslims can base the trading decisions on their analysis.
Conclusion
In general, swap-free Forex accounts are designed for traders who are unable to pay or receive interest due to their religious convictions. If you’re a Muslim and confused about trading in a halal way. Don’t worry, an Islamic trading account is completely halal since it does not call for the payment of swap interests. Whereas, trading in a regular trading account is haram because it entails interest payments. When opening an account with a broker, it is imperative to double-check whether the broker offers swap-free Islamic accounts or not.