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What is an Islamic Trading Account?
An Islamic trading account, also known as a Sharia-compliant account, adheres to Islamic finance principles. It ensures that trading and investing activities comply with Sharia law.
These are offered by certain brokers to clients that follow Muslim faith hence they’re known as Islamic accounts. Forex Islamic trading accounts are also known as swap-free accounts as they imply no swap or rollover interest on overnight positions.
Is trading legal in Islam?
In Islam, trading is permissible if it adheres to Sharia principles. Halal trading in assets like commodities and Sharia-compliant stocks is allowed, while trading in haram items or unethical businesses is forbidden. Fair and ethical practices are encouraged, and guidance from Islamic finance experts is recommended for compliance.
TABLE OF CONTENTS
- Is forex trading allowed in Islam?
- Compare online forex islamic trading brokers
- What is a swap-free account Halal?
- Riba
- Gharar
- Islamic trading broker account features
- Advantages of an Islamic account
- Open an Islamic trading account
- Examples of Islamic brokers
- Conclusion
- Frequently Asked Questions
- Recommended for you
Is Forex Trading Allowed in Islam?
Yes, forex trading is allowed in Islam, however, there are unique accounts designed especially for the Islamic people. The Shariah-compliant brokers do not charge interest on trades since this goes against Islamic beliefs. Check the table below to see which Islamic broker suits your trading style.
Compare Online Forex Islamic Trading Brokers
What is a Swap-Free Account Halal?
On swap-free accounts there is no daily crediting / withdrawal of funds / losses related to swap-operations. Thus, the client does not receive any extra income and does not suffer any extra losses.
Riba
The Islamic prohibition of making money from money, or Riba,” which specifically states that interest is not permitted by Sharia law. Riba can also be translated as “usury”, and it consists of what those of the Islamic faith consider unjust and exploitative gains made in the course of trade or business.
Gharar
The practice of Gharar can roughly be translated as gambling and is prohibited. That Arabic word also suggests an element of deception and can refer to a hazardous sale or risky investment. A very conservative case might be made that speculating on the forex market by trading currency pairs or CFDs is gambling. Nevertheless, long term and sound investments made in the capital markets, including the bond market and the stock market, would generally not be considered gambling.
Islamic Trading Broker Account features
Compliance with Shariah law: An Islamic trading account follows the principles of Islamic finance, including a ban on interest-based transactions and speculative behavior.
No overnight interest charges: Unlike traditional trading accounts, an Islamic trading account does not charge overnight interest on open positions.
Profit and loss sharing: Instead of charging interest, Islamic trading accounts typically operate on a profit and loss sharing basis, where profits and losses are shared between the trader and the broker.
Halal investment options: An Islamic trading account offers a range of halal investment options, including stocks, commodities, currencies, and index funds.
No hidden fees: Unlike conventional trading accounts, Islamic trading accounts typically do not charge hidden fees or commissions, making them more transparent.
Ethical investments: An Islamic trading account allows investors to make investments that align with their values and beliefs, ensuring that their investments are in line with their ethical principles.
Advantages of an Islamic Account
- No interest/swap charges on overnight positions
- No spread widening
- No up-front commissions
- Positions can be held with no time limit
- No re-quotes, no hidden costs
- 100% real-time market execution
- Free and instant access to all trading platforms
- 24/5 dedicated support from your Client Account Manager
Open an Islamic Trading Account
Islamic forex trading broker accounts differ greatly from those generally offered by other forex brokers. The difference lies in the fact that unlike most forex companies who substitute additional fees by widening the spread, Islamic forex trading accounts impose no additional charges.
In order to abide by the religious law of Islam, traders of Islamic belief are forbidden to pay interest. If the interest charge is transferred to a different type of fee, it is basically still a charge that covers the interest. This is also known by the name of swap-free in disguise.
XM, Hot Forex, Exness and IC Markets are against such practices and they oppose to fair and ethical trading conditions. Be sure to check out other brokers offering Islamic Trading such as FXTM, Avatrade and ECN. These offer trading services to countries like Zimbabwe, South Africa, UK and most of them are Global.
Examples of Islamic Brokers
XM Islamic Account
No Expirations
No Spread Widening
No Commissions
No Hidden Fees
100% Shariah Compliant
Exness Islamic Account
Committed to providing clients with the best trading conditions. They offer state of the art trading infrastructure and execution speeds enabling traders to gain a competitive edge.
FBS Islamic Account
Swap free accounts do not pay or earn swap or interest on any trades for Currencies, Metals & Indices excluding exotic Currency Pairs, Brent, Natural Gas, and WTI’s, where a small financing charge is applicable overnight.
Hot Forex Islamic Account
Accounts available are Micro, Premium, Auto and Zero Spread. The Islamic trading conditions replicate the ones of the trading account type but do not incur swap or rollover charges for holding positions overnight.
IC Markets Islamic Account
IC Markets offers Islamic account (also known as swap free accounts) for clients who cannot earn or pay interest due to their religious beliefs. The swap free option is available on both our Raw Spread and Standard account types on the MT4, MT5 and cTrader platforms.
Conclusion
In conclusion, Islamic trading accounts provide a vital avenue for individuals to participate in financial markets while upholding Islamic ethics. These accounts, compliant with Sharia principles, prohibit interest-based transactions and investments in haram sectors. They cater not only to Muslims but also to those who prioritize ethical and interest-free trading. To ensure full compliance, investors should choose a reputable broker, seek guidance from Islamic scholars, and embrace responsible trading practices that align with the values of fairness and transparency advocated in Islamic finance.
F.A.Q
Islamic accounts avoid interest (riba) and excessive uncertainty (gharar). They also prohibit investments in haram (forbidden) sectors like alcohol, gambling, or pork-related businesses.
Yes, non-Muslims can use Islamic trading accounts if they prefer ethical and interest-free investment options.
Some Islamic accounts may have slightly different fee structures, but the fees are generally competitive with conventional trading accounts.
Not all brokers offer Islamic accounts. Traders should choose brokers that explicitly offer Sharia-compliant accounts.
Seek guidance from Islamic scholars or experts in Islamic finance to ensure that your trading activities align with Islamic principles.
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Written By: Allen Matshalaga
Allen is a professional forex trader, blogger, and online enthusiast who spends most of his time testing and reviewing legit ways of making money online and is determined to help others succeed.