What Is Islamic Foreign Exchange Trading?
Tagged: forex trading
October 1, 2017 at 3:18 am #7768
Foreign exchange trading can be described as the trade of money. It involves trading one currency for another at the same time. The currency pairs you decide to trade will depend on the broker you choose. Not all brokers work with all currencies. Your trusted IB broker will handle all the transactions you make.
Islamic forex trading is slightly different to normal forex trading. It is required that you heed the Shariah laws if you wish to enter the world of foreign exchange trading. This means that there are a number of rules you have to adhere to.
Rules to Follow
The rules related to Islamic forex trading are:
• You should not be involved with swaps
• Your trading account should be devoid of interest fees or other charges
• You should not enter trades that you cannot complete on the same day
• You should avoid rollover charges
Regardless of whether you are new to this trading market or you have already entered it, you will need to find a suitable forex broker. This is often not an easy task and requiring one that complies with Islamic laws makes it twice as difficult.
To make it easier for Muslims to enter this market and comply with Islamic laws, many forex brokers offer special accounts.
This type of account contains specific conditions in accordance with the Islamic trading principles. The accounts are offered to those who heed Islamic law, but wish to trade in the forex market. The traders are able to take advantage of the spot market, with some adjustments.
• No Interest Policy
Under Islamic banking rules, one is not allowed to provide or charge interest for the services that are used. To make allowance for this, with the compliant forex account the interest payable or receivable is done as swap or rollover charges in the event that you hold positions overnight. With this account, the forex brokerage will absorb these charges which ensure that you are compliant with the ‘no interest’ condition.
Leveraged foreign exchange trading violates the banking law of Islam where you are not allowed to trade with money that you do not own.
Many brokers hide this type of information as they fear losing clients if they offer a no leverage policy, but there are those who offer this facility.
The religion of Islam is one of sharing with and compassion for others. Through this it promotes wealth sharing by donations and aiding in providing basic needs for those who are less fortunate.
Some forex brokers allow donations to be made by traders.
The best method for you to enter the world of foreign exchange trading as a Muslim who wishes to comply with Islamic law, is to do research. You need to become familiar firstly with the practices required to comply with Shariah law. It is possible for you to find forex brokers who can offer you assistance in this regard.
You have the opportunity with most forex brokers to open a trial account. This will allow you to trade in compliance with your religious laws. You will not actually be trading with real money which makes it easier to gain the experience you require for trading in a real account.
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