Forex trading is the world’s largest trading system. Do you believe that a market has 6.5 trillion dollars daily volume? Just UNBELIEVABLE! But with this huge concept, some question pops up in mind. Here’s one —
Do Muslim traders accept Forex is Halal or Haram?
The question as to whether Forex trading is permissible according to Islamic law is a difficult question to answer conclusively. Although Islamic authorities certainly agree that currency exchange under certain conditions is halal, there is some dispute regarding under exactly what conditions.
Forex Trading — Halal or Haram Fatwa
Usury is, of course, completely prohibited in Islam and is defined very widely. This implies that any kind of deal or contract which involves an element of interest is not permissible according to Islamic law. For a long time, retail Forex brokers reflected the market practice of paying or charging the trader the interest differential between the two components of any currency pair whose position remains open overnight. Eventually, most Forex brokers responded to market forces by becoming “Islamic Forex Brokers” and offering “Muslim Forex Accounts” which operate without standard interest payments. You might ask how they did so and maintained the profitability of their operations. This was achieved by charging increased commissions in Forex trades, and this practice has become the hallmark of nearly all Islamic Forex brokers. Arguably, this in itself is just a camouflaged interest component, and if this view is taken, it makes Forex trading problematic according to Islamic law.
What Islam Says on Online Forex Trading
Having reduced the issue to one of trading spot Forex and assuming there is no interest element deemed to be involved, we move onto the next issue. It would seem to be permissible only “so long as it [the exchange] is hand to hand”. So clearly, the Prophet Mohammed (peace be upon him) had in mind exchanges of different types of commodities that would be made between two parties, recognizing that this was a natural and just aspect of commerce. The question here lies in what is considered to be “hand to hand”. In the olden days, there were no computers or telephones, so the aspect of making a deal face to face wasn’t much of a question. In fact, one could extrapolate that it was natural and accepted for a deal to made between two different parties. In modern times, it can be argued that in regards to Forex trading, the deal is made between a Forex broker and a trader, so this would qualify under such a definition of two different parties: permissible Islamic law.
Here, we arrive at the biggest hurdle in attempting to answer the question “Is Forex halal or haram?” Generally, Forex traders do not expect to take actual delivery of the currency they are “buying”, and never actually own the currency they are “selling”. They are simply speculating that one's value will go up and another’s value will go down. Is such speculation permissible according to Islamic law?
The Bottom Line
This matter will not solve unless you solve the puzzle. Forex trading will be Halal when you really do believe in Islamic laws and believe that forex is just a business nothing else. Make forex market analysis to secure your profits and stay in the long run. A Muslim trader must use Islamic account (Swap-free account). Otherwise, you can’t make forex Halal if you are Muslim.
Gratitude!
