Islamic Forex Account – Islamic Forex Trading
The Forex traders belonging to the Islamic faith and honoring the Shariah Law find Forex trading in disagreement with their belief while trading in a regular Forex Trading Account. It is because of the interest credited or settled in a regular Forex account. This brings in the requirement of a Swap Free or Interest-free Islamic Forex Trading Account.
Because of this, ceratin forex brokers allow customers an Islamic Forex Account option when signing up. However, bear in mind that not all forex brokers are made alike, and the specifications of Islamic accounts can also change significantly. Thoroughly consider your religious principle, your broker’s highlights, and needs as a trader before starting an Islamic Forex account with any Forex broker.
List of Islamic Forex Brokers
Islamic Forex Account
An Islamic or Halal Forex trading account varies much from a regular Forex trading account in some ways. The Sharia law forbids applying interest on funds invested in the trading account. The Islamic Forex Brokers prohibit accounts from acquiring or getting rollover swap points on positions that stay open at the New York close of 5 p.m. EST.
Another significant highlight of an Islamic Forex account is that transactions need to be processed in real-time. This implies that currencies must be shifted between accounts immediately after the transaction, and the price of the transaction is settled at the same time.
Two of the Islamic Principle’s key components that link with Forex trading accounts are as follow:
The Islamic interdiction of earning money from money, or Riba, and that includes interest, is not allowed by Sharia law. Riba can as well be interpreted as “usury” is made of what those of the Islamic belief regard as wrong and illegal gains made in the field of trade or business.
The habit of Gharar can be interpreted as gambling and is forbidden. That Arabic term also means a component of fraud and can lead to a dangerous sale of an unsafe investment. A highly traditional case might be made that venturing on the Forex market by trading currency pairs or CFDs is gambling.
Although the long term and safe investments made in the capital markets, as well as the stock and bond market, would commonly not be regarded as gambling.
These Islamic Financial Principles forbid the following financial activities:
Overnight rollovers – That is, when trading currencies, an investor borrows one currency to purchase another. The interest paid, or gained, for keeping the position overnight is described as the rollover rate. A currency position that remains open after 5 p.m. EST is considered overnight position.
Net interest margin (NIM) – shows the amount of money that a bank is making in interest on loans compared to the amount it is paying in interest on deposits. NIM is one of the signs of a bank’s advantage and progress.
Loans – Money transported by a bank or financial institution as a loan to a customer with interest terms is banned because it concerns Riba. Contracts and agreements to pay back loans also fall into this forbidden category.
Margin trading – Trading stocks on margin include repaying interest for using money from a broker to buy or sell assets, so that would also be against Sharia law. On contrary, forex trading just asks a margin deposit with no interest when you make a transaction on margin.
Short sales – Involving in a brief sale by borrowing and afterward trading an asset for a profit is restricted. This is often a problem with stock trades but not with forex trades.
Forward sales – Sharia forbids negotiations to buy or sell at a later date on a cost agreed upon today. This would stop you from bounding into forwarding contracts or trading futures contracts.
What to consider while choosing an Islamic Forex Account
A Forex broker should be regulated by a reliable Forex regulator, such as the Australian Securities Investment Commission (ASIC), the Cyprus Securities and Exchange Commission (CySEC), the U.S. Commodities Futures Trading Commission (CFTC), the National Futures Association (NFA), the U.K.’s Financial Conduct Authority (FCA) or the regulator of your country.
Several Islamic Forex brokers that give customers swap-free Islamic Forex accounts place time limitations on the no-swap period. Some brokers will grant you a limited free swap-free period. For instance, the swap-free account will be allowed for five or 14 business days in various accounts. Moreover, forex brokers frequently ask likely customers to explore Islamic accounts to explain why they need this sort of account and ask for verification of their religious affiliation. Significant variations may exist so make sure to double-check with each broker about the particular terms and conditions of the Islamic account. Additionally, inquire about a broker’s swap-free time frame and if Islamic accounts need a larger deposit. Remember to question how wide dealing spreads are in the Islamic account and the set of maximum leverage ratio you can anticipate.
Other factors for an Islamic account include the same type of components you would look for in a regular Forex account, such as the currency pairs, trading platform, website, asset types you can trade, customer support, and trading platform in your preferred language and educational resources.
If you don’t have any experience with trading yet in the Forex market, look into the best forex broker for newcomers that also offers an Islamic account and Free Demo trading account.
The Best Islamic Forex Brokers 2020
Looking for the best Islamic Forex broker in 2020 relies mostly on your needs as a trader. If you have experience in forex trading, then you presumably have an opinion of what to consider in a broker. Still, if you are beginning from square one, then a broker with educational resources and an easy-to-navigate trading platform would be your most suitable option.
Compiled here is the list of brokers that offer Islamic Fore trading accounts:
Established in the Marshall Islands, this broker offers an Islamic Forex account with a two-week deadline on positions held overnight without acquiring swap/interest fees. The easyMarkets Islamic accounts are completely Sharia-compliant and partake the same benefits as their other account types.
In addition to Forex, easyMarkets grants clients access to choices and more than 200 CFD markets that include currencies, precious metals, commodities, and indices. The broker is regulated by CySEC in the EU and by ASIC in Australia. Also, easyMarkets has an extensive educational section on its website that highlights free e-books, a trading dictionary, and a helpful knowledge base for new traders.
The broker requires a low minimum deposit amount of $250 and a maximum leverage ratio of 400:1.
EasyMarkets offer an MT4 trading platform and its mobile application, as well as its own developed easyMarkets trading platform. Other trading tools proposed by easyMarkets is made up of its easyTrade tool that allows you drive your winners to maximum profit, a sale reversal feature that lets you cancel a losing trade for a small charge and a Freeze Rate tool that allows you to freeze the price of a currency pair and provides you a few seconds to execute your trade.
Based in St. Vincent and the Grenadines, HotForex proposes an Islamic Forex trading option for its Premium, Fixed, Micro, Zero Spread, and VIP accounts.
This account type does not do swap or rollover charges on overnight positions, but be conscious that HotForex maintains the right to apply a carrying fee on some currency pairs kept overnight for more than seven days. HotForex gives more than 100 tradable instruments, including CFDs on cryptocurrencies, indices, forex currency pairs, stocks, commodities, and bonds. They are monitored by regulatory agencies in Cyprus (CySEC), U.K. (FCA), France (ACPR), South Africa (FSCA), and Germany (BaFin).
It also presents competitive fixed and changeable dealing spreads, with a variable spread as low as 0.2 pips on EUR/USD. You can set up a micro account with as low as $50 with a maximum leverage ratio for forex positions of 500:1. Another great plus from HotForex is its negative balance protection.
HotForex supports the MT4 apps for Android, iOS, and Windows mobile devices and MetaTrader 4 trading platform. Also, it offers the PAMM account for managed Forex account, and HFCOPY for copying the trades of succesfull traders in your own account.
HotForex is accessible to traders from all countries besides the U.S., Canada, Sudan, Syria, and North Korea.
This universal multi-asset broker provides an Islamic Forex account and is based in London and Melbourne. The Islamic account offered at ThinkMarkets also has unlimited time for keeping forex positions. Still, if there are any errors or fraud in the account, ThinkMarkets can choose to change the swap-free account back to a regular one.
ThinkMarkets provides its traders access to various markets and tradable assets, CFDs on metals, indices, cryptocurrencies, including forex, and stocks. The broker is approved and regulated by the FCA and the ASIC. ThinkMarkets grants customers a free VPS service in addition to expanded educational resources for amateurs and new traders.
The broker provides the MT4 trading platform for Mac and Windows, both on mobile and web-based forms. In addition to the MT4 suite, ThinkMarkets offers an excellent wholly-owned platform named Trade Interceptor, which you can use on a tablet, mobile app, and your desktop.
Other trading tools available are FX Wire Pro, AutoChartist, and MT4 Super. The minimum deposit to sign up at is $250, and the maximum leverage ratio is 500:1. This broker does not accept retail U.S. clients, but it does take U.S.-based qualified contract members as set by the Commodity Exchange Act.
Islamic Forex Trading FAQs
What is Islamic Forex trading?
This is new-age financial trading involving Currencies, Commodities, Stocks, Cryptocurrencies, and Indices online while complying with the Islamic Financial principles. The Islamic Forex trading does not incur interest or Riba on overnight positions to stay compliant with Islamic finance principles.
Can Muslims trade Forex?
Yes, as per many experts, Muslims can trade Forex in the specially designed Islamic Forex trading account. These accounts are specially designed for traders belonging to the Islamic faith.
Is Islamic Forex trading Halal?
Yes, Islamic Forex trading is Halal as claimed by the Forex brokers providing the service. However, we don’t have enough expertise and authority to advise you about this. The traders’ community have different views on whether it is Halal or not. Hence you should seek appropriate guidance if you have any doubt as it involves your religious sentiments.
Trading in an Islamic Forex account may have some disadvantages, but importantly all dropped rollover swaps on overnight positions, at least for a limited time. Holding Forex trades overnight is unsafe, except you place protective stop-loss orders.
Also, day trading tactics that close out positions by 5 p.m. EST don’t need rollovers, so utilizing them in a regular account should not include Riba, but if you’re a long-term trend trader with deep pockets who means to run overnight positions regularly, then use a broker with unlimited time to hold positions such as ThinkMarkets.
Lastly, if you want to improve your experience in forex trading, easyMarkets and ThinkMarkets have some of the best educational resources among the brokers evaluated.