Forex Trading and IslamForex Trading and Islam

Forex Trading and Islam
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May 28, 2007 (Last updated on June 7, 2013) The topic of Forex trading prohibition in Islam is vast and controversial. Many points of view exist on different aspects of on-line Forex trading including spot trading, futures and options trading, margin trading, overnight interest, etc. The majority of the Islamic jurists agrees that Forex trading can comply with Sharia only if it is spot trading (while futures and options are considered to earn Riba) and if it doesnt involve any overnight interest (or interest hid by commissions, though Muslim traders should know that not all commissions are to hide overnight interest). One of the main point of debate lies in margin trading (almost every transaction in Forex is based on margin) and hedging (it is compared to futures trading usually). Dr. Mohammed Obaidullah of Universiti Tun Abdul Razak (located in Malaysia) discusses this topic in his article Islamic Forex Trading. It is a well grounded article covering every aspect of Forex trading and providing references to the fundamental Islamic sources. Among other things, Dr. Mohammed Obaidullah proves margin Forex trading to be legal for Muslims, as long as it doesnt involve any Riba (unlike some other Islamic jurists who look at margin Forex trading as forbidden activity). In this articles the Forex hedging is also analysed and is seen as the source of Riba income. I strongly recommend reading this article to all Muslim traders and those who want to start trading Forex while remaining a lawful Islamic believer. I also recommend looking at the list of the Forex broker that offer Muslim-friendly trading accounts with no overnight-interest applied on the open positions. Some important things have changed in Islamic Forex since this article had last been updated. In February 16, 2012, the National Fatwa Council of Malaysia (nations supreme Islamic legal body) announced that spot Forex
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trading performed by individual traders (contrary to authorized dealers) is considered haram (sinful). Technically, it restricts all Muslim residents of Malaysia from participating in online foreign exchange trading. It is important to add that no other Muslim fatwa institution in other countries has issued similar prohibition. On the contrary, National Sharia Board of Indonesia had previous issued a fatwa (the link is in Indonesian) stating the legality of Forex. Apparently, the situation with Islamic Forex trading still remains quite unclear. And what do you think about legality of currency trading for Islamic believers? by Andriy Moraru Tags: Forex, futures, hedging, Islam, margin, Muslim, options
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25 Responses to Forex Trading and Islam

1. Quran Tutor
August 23rd, 2009 at 5:23 pm
I will talk with muslim scholars about this matter Reply
FAURE Reply:
April 4th, 2010 at 3:04 am
Salam, Do you have any answers so? Thanks in advance, Reply 2. N. Ahmed
August 17th, 2010 at 6:43 pm
Recently I cam across the article on the Internet on same subject and since then I am trying to search about the issue raised by the writer that wether foreign currencies shall be treated as same class or different class. the link to article is: http://myblog.hazariba.com/Islamic+Legality+of+FOREX+business Reply
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3. hello
November 2nd, 2010 at 2:16 pm
Assalamualykum, i have tryed to read this article but the english is a bit complicated for me to understand everything, but im just wondering is it halal to use a broker u mean? And what should a do to make the trading as islamic as possible? Reply
admin Reply:
November 2nd, 2010 at 3:42 pm
1. Trade on accounts with no overnight interest on positions (swaps). 2. Trade on accounts with no yearly interest on balance. 3. Optionally, trade without margin. This is a point of debates, but if you want to be completely sure, use no leverage in Forex trading. Reply
ata Reply:
September 30th, 2011 at 5:53 am
How can one not use leverage? Reply
admin Reply:
One can trade without leverage with a broker that supports 1:1 leverage that is, no margin. Reply 4. Muhammad Ashfaq
June 1st, 2011 at 5:53 pm
plz send me complete info about what says sharia about dcapforex trading online Reply
admin Reply:
June 1st, 2011 at 6:06 pm
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Whats dcapforex? Reply 5. Usman

October 5th, 2011 at 9:49 pm
If u traded with no leverage then u would need over 100k to buy 1 lot!!! If u are trading less then 1 lot which is a 100k, u r not trading in the live market, so ur trading in a box enivorment so ur not even trading real money , like a Market maker!!! Like panda who trade against u Reply
Usman Reply:
Oanda for trade against you Reply
admin Reply:
There are ECN brokers with mini and even micro lots. Reply 6. Fahadbinkas
February 29th, 2012 at 12:53 pm
I want to start forex trading.i want to know about spot,option,edging,brokerage,trade by hold. Reply 7. Kais
May 20th, 2012 at 6:15 pm
Not clear yet is hedging halal or haram? Islamic accounts with forex brokers are swap-free but allow hedging? Reply
admin Reply:
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May 20th, 2012 at 7:15 pm
Why not allow hedging? What could be the problem with it? Reply 8. ibtisaam
how in Allahs name can buying and selling money for a profit be anything BUT riba?!!?? you are not adding one IOTA of utility to the economyhow can people so gifted mathematically be so dense in this regard? may Allah guide us all Reply
admin Reply:
September 10th, 2013 at 2:08 pm
Sorry, but you are not correct about not adding one IOTA of utility to the economy. Currency speculation creates liquidity and helps remove inefficiencies from pricing. Reply 9. ibtisaam
sorry, i should have specified real economy Reply
admin Reply:
Currency market is used by what you call real economy. Without liquidity created by speculators, the spreads on currency exchange used by, for example, travelers would be much wider than they are now. Reply 10. ibtisaam
why not leave it for the kuffaar to do? why try to prove it compatible with islam? fiat currency and its fluctuations are the riba dust that affect us all Reply
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admin Reply:
I would leave that to the scholars to decide. Reply 11. Syed Afaque
i had a account is Easy Forex and i am doing trades in gold, after depositing my money, i will set buy and set sell in particular amount. is it halal for me? Reply
admin Reply:
I am in no position to give you a qualified answer, but as far as I know it should be halal as gold is traded without interest rate. Reply 12. Muhammad
As-Salamu ^Aleykoum Wa RahmatulLAHi Wa Barakatuh, I have came across this website some months ago. As we can see, in Indonesia there is a Fatwa says apparently that forex is Halal. Some people say Halal others haram. I would like to know if there is any trader over here who is currently, trader and who have asked some Scholars about it? There is, for example on Koweit, broker which is regulated by the law of the country. Koweit is a Muslim country right? Admin, are you trader yourself? Did you asked any Scholars about it? Baraka ALLAHu Fikoum for your answers, Reply
admin Reply:
I am a trader, but I am not Muslim, so I cannot give a well-informed advice here. Reply
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