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  • by Shana Rasul
  • May 05, 2022
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Is Forex Trading Haram?

 

Table of content

  • Introduction
  • Forex Trading as a Usury
  • Forex is acceptable to Islam under these conditions
  • Types of haram trade in Islam
  • Forex Trading and Gambling
  • Is Forex Trading Gambling?
  • Pros and Cons of Forex Trading

 

  

Is Forex Trading Haram?

 

Verse 2.275 of the Qur'an states, "Allah has made trade lawful and usury unlawful." However, not all types of trade are considered halal. In the Qur'an, gambling (maisir, money games) is completely forbidden. The Qur'an does not mention gharar (risk), but a number of hadiths state that it is haram to sell products such as "birds in the sky or fish in the water", "catching a diver" or "an unborn calf in the mother's womb". These are called bayu al-gharar (literally "risky trading", where sales are the main factor in the decision).

 

Forex Trading as a Usury

 Forex trading as a usury

According to Islamic principles, usury is considered to be any work or contract that provides for the receipt of interest or usury. In the Qur'an, this kind of trade is clearly condemned. According to the Qur'an, interest is considered unfair and usury is considered degrading. Therefore, in Islam, only one type of loan is allowed - Garzul Hasan or interest-free loan. In a typical Forex trade, if an investor takes an open position in a day, brokers receive a commission on the exchange. This is not acceptable in Islam because the commission is mainly an interest rate. 

 

Forex is acceptable to Islam under these conditions

Forex is acceptable to Islam under these conditions

Forex is Halal when you do not use Forex to gamble.

  1. Forex traders must have a reason to move (buy or sell) in the market.
  2. The trader should not play trend-oriented sand, it is only possible to analyze the market.
  3. It is not allowed to trade for the end. Traders should approach the market as a real business and trade for potential income.
  4. Forex should be approached as a business, not as a game.
  5. It is necessary to think about earning or protecting the invested capital.
  6. It is necessary to learn from the losses.

 

Types of haram trade in Islam

Types of haram trade in Islam

There are a number of trade and financial transactions that Islam considers haram. Take a look at 4 types of trade that are mainly forbidden in Islam:

Riba is haram in Islam - if he receives various hard interests from the buyer.

Loan collateral is haram in Islam - if you sign an obligation to repay your debt within a limited period of time during which the lender can sell your contract to repay the loan if you are unable to repay the loan or its interest.

Interest-bearing loans are haram in Islam - when you borrow and receive interest from the borrower.

Short-term trading strategies are haram in Islam - it is also haram in Islam to borrow and sell a financial loan that does not belong to you in order to make a profit.

 

Creating an Islamic Forex Account

There is no question that currency exchange is permissible in Islam, provided that there is no interest element, that it is made hand to hand, and that the exchanger has a valid reason to anticipate a probable profit based upon such exchange. 

Islamic forex brokers have minimal trading limits that should remove some of the problems. It seems that there is some grey area in this qualification that needs to be thoroughly researched and evaluated by any person wanting to begin halal forex trading through their Muslim currency trading accounts.

Here is the list of the brokers that have the Islamic account option:

XM Group

➡️ Min. Deposit: $100
➡️ 1:888 Max. Leverage
➡️ No spread widening
➡️ No interest/swap charges on overnight positions
➡️ Positions can be held with no time limit

Open an account on XM

 

Fpmarkets

➡️ $100 Min. Deposit
➡️ 1:500 Max. Leverage
➡️ Spreads from 0.0 
➡️ 60+ FX pairs, metals, indices, commodities
➡️ $3 Commission per Lot: 

Open an account on Fpmarkets

 

Blackbull Markets

➡️ Available in both Standard and Prime
➡️ Swap Free
➡️ 1:500 Leverage
➡️ Micro Lots Available
➡️ Access to all Tradeable Instruments

Open an account on BlackBull


Fxview

➡️ Spreads from: 0.0 
➡️ Max. Leverage - 1:500
➡️ Negative balance protection
➡️ $1/100K Commision

Open an account on Fxview
 

Forex Trading and Gambling

Since the Forex market is volatile, when you open any forex position, it is possible to say in what form the gamble took place. The market is really very dynamic, and even based on accurate research and analysis, no one can predict exactly how the currency pair will behave. Only analytical tools and past forecasts can be relied upon, but they also cannot provide accurate information. With each Forex position entered, the trader will always be exposed to Forex risk. This is a risk that you are exposed to the dynamics of the market or you do not know how it will act in the coming days or even hours. Regardless of the amount of technical or fundamental analysis performed, Forex risk will always be present, and this indicates a certain amount of Forex gambling in each trading position you see.

Forex trading and Gambling

The differences between the gambler and the Forex trader become apparent in the game process. Gamblers can't always be sure of their chances of winning the game, and they believe that the chances are right for them. Forex traders, on the other hand, try to manipulate the gaming process with strategies that will work in their favour.

They use a variety of analyzes to predict eye trends and to create a favourable position for themselves. They are confident that they will be able to gain a lucrative position after skilled trading patterns. This shows the main difference between a Forex trader and a gambler.

Users of these two markets are very different and have different attributes. Let's take a look at the main attributes that distinguish them:

1.  Amount

The main reason why people enter these fields is, of course, to make money in the first place. Everyone wants to make a good investment by betting or maintaining a market position that will generate positive cash flow in their favour. The amount of money circulating in these industries is very different. In the Forex market, traders from all over the world trade a total of about 5 trillion. In betting, the price never comes close to that. The price difference is one of the main differences between these two areas.

2.  Tools used

There are many programs that will help to analyze the market in Forex trading, and there are detailed instructions for traders on how to open and close a trading position. These depend on the trader's trading strategy and analysis method. Using technical and fundamental analysis, traders can adequately research and observe market trends before making a decision. This shows us that there are no lucky traders, all of whom are informed by accurate market research. These tools help the Forex trader to be more successful and make the right decisions. There are no such tools in gambling. There is no tool for gamblers to learn, be informed or make decisions. This shows that gambling is completely dependent on chance.

3.  Industry participants

The desired business area will have its own users. These are long-term or short-term players, big or small, all of whom come together to succeed. The users of the Forex market are mainly retail traders. These are individual investors who have developed their own trading strategies in order to gain market dominance in different parts of the world. Gambling is always banned in many parts of the world, so there are always a lot of legal obstacles. Its users are limited to illegal underground activities, which puts everything in this area under control.

  4.  Emotions

After gambling for a while, most players become addicts and want to play continuously. According to research, this is due to the emotions associated with gambling. The only thing gamblers want and think about when they enter a casino is to make money. In this case, they ignore the possibility of losing money. Since they have no means to make informed bets, all of this depends on their chances, and if they are not on their lucky days, they can lose everything. Instead of discouraging anyone from gambling, they will tend to come back again and again until they become addicted. Forex trading is completely different. During training, the trader can distinguish his emotions from the decisions he makes. The trader must be able to distinguish between fear and greed in order to make a more accurate, appropriate decision and make a profitable trade. This means that it does not depend on any emotion, and accordingly, the trader can move away at any time.

 

Is Forex Trading Gambling?

Many people consider Forex trading to be indistinguishable from gambling. When taking a position in a certain currency pair, the trader takes a short or long position and bets to either fall or rise in price. Maybe Forex trading is really a kind of gambling?

If you look at an inexperienced and uninformed forex trader or any currency pair and see that it is acting randomly, it is quite possible to come to this conclusion. However, the world's largest financial institutions and individual traders can make a steady profit from trading in the forex markets. This shows that they don't accidentally put a large amount of money into gambling.

Is Forex trading gambling

The main way in Forex trading is through technical and statistical analysis. This is mainly the process of learning charts and technical indicators to help identify trade patterns and find the most likely trade positions. They work well because all traders in the world look at the same charts, the same indicators, the same statistics, and know that they are repeating the same patterns.

 

Pros and Cons of Forex Trading

 

The Pros of Forex Trading

The pros of Forex Trading

Easy access to the market: Currently, the Forex market is almost the easiest financial market to open an account and start trading. Opening an account for online forex trading can be done in a few minutes from anywhere in the world, with a smart device with $ 1 and internet.

Trading: Almost all forex brokers can easily trade by opening a free demo account, or you can measure the services of a broker.

Leverage: Unlike the stock market that covers trading, forex positions are based on currency exchange. Even if you can only use the exchange trading position on a margin account with a margin of 2: 1, forex trading in cloth jurisdictions can be used up to 1000: 1. In accordance with US regulations, the main currency pairs were hardened to 50: 1, and the small currency cuts to 20: 1. E.U was limited to 30: 1 for the main currency pairs and 20: 1 for the small ones.

Ease of going long or short term: Unlike other bond markets, there are no obstacles for a trader to go short term. This means that the process of traders buying and selling currency pairs is easily implemented.

Moderate volatility: Significant changes without high market volatility provide traders with more opportunities and stable returns from a market with low or very high volatility. This adapts the forex market to daily trading strategies.

Low additional costs: Due to high liquidity and low trading costs, the overhead costs that forex traders have to pay are lower than those traded in other financial markets. Forex trading is usually commission-free, so traders only have to pay for the spread of the deal. It is also a small amount of risk capital that traders need to start forex trading as a device with only internet access and a margin deposit.

 

The Cons of Forex Trading

The cons of Forex Trading

Trading against traders: A retail forex trader trades against many professional traders, large transnational corporations, national central banks and funds in the forex market.

Information about world events: Since the Forex market consists of national currencies, knowledge of macroeconomics and acquaintance with world events are extremely important in order to obtain consistent benefits. Ideally, research should be conducted in each country to make more informed trade decisions.

Valuation of the exchange rate: Unlike stocks, the scope of currency valuation is not easy to handle and works by facilitating a number of factors that are clearly visible or invisible in the market. This also works against retailers who do not have access to such information.

Leverage: Trading with Leverage is a double-edged sword for traders. On the one hand, it can increase the trader's profit, but it also increases with leverage on losses. Leverage is as much a disadvantage for traders as it is a disadvantage.

Volatility: Although volatility is not important for short-term traders, it is an important nuance for medium or long-term traders. These medium or long-term traders may find it difficult to cope with these changes, and this can make them careless.

Patience is required: Successful, long-term trading usually requires patience, because the trader has to wait for good, profitable opportunities. Traders need to “get into the groove,” and it takes some time to get used to the forex market in order to trade profitably and for a long time. Trading with a demo account will be a more profitable way for traders with limited or no experience.

Low regulation: Because the Forex market is unregulated, many online forex brokers operate with little or no oversight, depending on the broker's jurisdiction. This diaper can be a problem in countries. If a trader lives in a Eurozone, UK or US jurisdiction, a trader can only trade with forex brokers regulated by the Commodity Futures Trading Commission (CFTC) in the United States.

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