Is forex halal or haraam? Is it permissible to deal in currencies in the foreign exchange market forex over the Internet? The answer is in Surah Al Baqarah, verse The abuse of ra-ya-ba to the point of harming others is what i define as riba. A resolution of the Islamic Fiqh Council in Jeddah no. What Forex broker has the lowest leverage?
The question as to whether Forex trading is permissible according to Islamic law is a difficult question to conclusively answer. Although Islamic authorities certainly agree that currency exchange under certain conditions is halal (i.e., permissible according to Islamic law), there is some dispute regarding under exactly what conditions.
What is the ruling on Forex Trading in Islam?
Join the Leading Industry Event! Two features of Islamic finance distinguish the system from conventional finance. According to the Islamic view, a non-Islamic, interest-based loan guarantees a return to the lender but the burden of risk falls disproportionately onto the borrower.
This unequal distribution of risk where the borrower bears more than the lender is exploitative, socially unproductive and economically wasteful. Secondly, the purpose of Islamic finance is to promote economic and social development, through specific business practices. Accordingly, the objective of Islamic finance is also the well being of people in this life and in life Hereafter.
Islamic finance must contribute to the development and the good of the Islamic community. Not surprisingly, therefore, the fundamental feature of Islamic finance is socio-economic and distributive justice. Basic prohibitions in Islamic finance are:. There is little or no disagreement among Islamic scholars and legal scholars about the prohibition against interest. Making money from money is not Islamically acceptable and interest based transactions are a sin.
Interest is any predetermined payment over and above the actual amount of principal of loans and debts, regardless of whether interest is charged on commercial or personal loans. Islam allows only one kind of loan and that is the interest free loan or the qard al Hassan good loan. Of course, there is a widely understood argument that interest carries benefits. Accordingly, forex trading must also conform to Islamic finance principles. An exchange of money-for-money of different currencies, but equal values — such as U.
In other words, there is no interest in a spot currency or foreign exchange transaction. The problem arises when one payment is deferred, or delayed, as in a loan transaction, foreign exchange forward or futures contract, or currency swap. Related Questions What does Islam say about homosexuals, their rights, marriage, punishment if any? And what issues do gay Muslims face in their daily lives? Is numerology allowed in Islam? What is pip, leverage in forex.
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Are birthdays allowed in Islam? In such cases, Sharia law allows you to implement various economic plans, such as the use of a different currency, or a physical currency such as gold, or other non physical currencies that are backed by gold. Investors and small businesses can in such cases, save their businesses and stop losing their hard earned money.
As in the case of Venezuela, there are things people and small business can do, which are fully compatible with Islamic finance, to help rebuild their economy, reduce poverty and to reward foreign investors in the end. It is perfectly moral to profit out of Venezuela but only after your investment helps the people of Venezuela get out of poverty.
Muslim traders are allowed to use forex in ways not related to interest rates, to make a profit, in order to offset a loss elsewhere. They can trade market volatility on a currency pair, they can trade commodities. But it has to be on the spot market. In other cases, Muslim traders and investors in an oil exporting country, can offset the loss of national income, when crude oil prices fall and keep in falling, by going long USDCAD, or by making direct trades on crude oil that are compatible with Islamic law.
Immoral finance practices are blamed not only by Islamic scholars, but also by other groups, of non Muslim people, who simply see the injustice. Sharia law goes further, by arguing that you should also have financial goals which should end up benefiting society. And this is a requirement in other religions also, though in a less rigorous way.
The forex market today is neither evil nor good, it can be both, and profits made from it can have different kinds of impacts on the world. Forex affects so many things and helps facilitate and smooth out trading of physical goods, around the world. The Carry trade strategy is the main strategy that is not allowed in Islamic forex trading, and even that comes with massive risks, risks that even investment banks cannot evaluate.
Critics will argue that this strategy should be allowed, even for Muslims, in cases where their own country pays interest rates to some foreign lender, or that the national currency may fall as a result of that debt. Sharia law is against this strategy and against using forex brokers that work with interest rates. Nonetheless, even Muslim traders in heavily indebted countries, can still make Sharia-compatible forex trades that will offset the effects of such national debts, at a personal level.
Muslim forex traders are allowed to trade the volatility of the spot forex market, and from that alone, one can offset the negative effects the global markets have on them. In commodity markets such as gold, crude oil or grains, when priced in USD, the impact of the USD is directly seen in the commodity prices. So if one trades for example gold, even physical gold, they are already, also, a forex trader who trades the USD. So the forex market can be used to offset risks in these commodities and to stabilize a business which depends on the price of these commodities.
You can find your way to morality and justified forex trading from these trades, and then learn more about Sharia law and how it specifically may or may not permit your new forex trading strategy.
What is Forex Trading?
Forex trading is, in the simplest of terms, currency trading. It is a globally decentralized market where businesses, investors, banks, governments and traders come to exchange currencies. Being the largest and the most liquid market in today’s world, forex trading has reached stupendous levels of popularity, resulting in an average daily. Since all this involves money, trading and exchanging, how does Islam view it all? What kinds of foreign exchange transactions are acceptable in Islam? In short, foreign exchange, in the form of using money as a commodity, is not permitted in Islam. The Islamic Fiqh Council of the Muslim World League, in its eighteenth session that was held in Makkah al-Mukarramah from 10 to 14/3/ AH (8 to 12 April CE), has examined the issue of trading in margins, which means that the customer pays a small amount of the value of what he wants to buy, which is called a “margin”, and the agent.