Is forex leverage halal

In Islam halal means lawful or permissible, whilst on the contrast haram mean unlawful or forbidden. So in trading for example, there are a lot of areas where actions could be considered halal or not. Before we begin however, we would like to point out that with this article we are not trying to give religious guidance to our readers. We recommend speaking to a religious leader or Islamic scholar in order to get clarification and additional discussion about halal. Our articles intention is to look at some of the main areas of Forex trading that offer ways to make trading halal, as well as things that are classed as haram in Islamic law.

Although currency trading under certain conditions is seen as halal by some traders, t here are some aspects of trading which will always remain haram in Islam.

Is Forex Trading Halal?

According to Islamic law, any trades or exchanges that involve elements of usury and Riba interest are forbidden. Gambling is also strictly haram. When these conditions are applied to online brokers, most trades involve gambling and interest right? Surely this would make trading forex haram? Well, many forex brokers have removed these elements and adjusted conditions for their Islamic accounts. No commissions are charged for contracts or orders that are open for more than 24 hours.

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Brokers should also not charge any fees for account management and offer interest-free leverage. Well this is why the answer to forex trading haram or halal is a complex one to answer. One thing that will always be haram and totally forbidden in Islam is Usury. Meaning that any business deals or trading which includes aspects of interest Riba is not allowed under Islamic law.

Yet in most normal Forex trades, online brokers will charge the differential interest on any currency pairs that are held overnight.

Forex Trading - Halal or Haram Fatwa

This interest charge is therefore prohibited and haram as it is not allowed due to the laws of interest. However many Forex brokers now offer specialist Islamic Accounts. In order to keep their operations profitable many brokers charge increased commissions on Forex spot trades instead. Always check directly how much the spot trade commissions could be. But is Forex halal with these Islamic Forex accounts? If signing up for an Islamic Forex Account always ensure that they have certifications of Shariah compliance and reach out straight away to the broker with any questions on the Islamic accounts.

Another aspect of Forex that is important to analyse for Muslim traders is the stance of hand-to-hand exchanges.

If the types are different then sell however you like, so long as it is hand to hand. So is Forex halal if a trade is made hand to hand between two parties? This means that if there is no factor of interest involved in the trade, and that the trade is made hand to hand between the broker and the trader, then this type of Forex trading could be considered halal. But surely online trading cannot be classed as hand to hand? Yet it has been debated that a Forex trade, even if on online, has still been made between the trader and the broker. So this would fit to the definition of two distinct parties, and could be considered as halal.

Scholars have said that it is allowed as long as the transaction is made hand to hand and exchanged in one sitting.

But if there is a delay in the sitting then that is not allowed because it is considered as a riba derived transaction. With most Forex traders though, trades have to be entered and exited all but straight away so this could be considered as completed in one sitting. A key element of trading forex is the use of leverage.

Leverage allows traders to maximise their profits by letting them place larger positions. This in turn can increase your risk, so leverage has to be used wisely.

However, is leverage trading considered halal? The best thing is to think of leverage as a multiplier tool which you can use to boost your profits. Many Islamic Trading accounts will also mention that all leverage remains interest free to reassure their Muslim clients. One thing that will always be haram and strictly forbidden for Muslims is gambling. But is Forex halal or gambling? This is where there is a grey area between Forex and gambling and it is important to know some key points to make sure the two remain separated. Because if you do not gamble, Forex could be seen as halal as trading is permitted.

However the following points should be examined :. By treating trades more in a businesslike manner, the further away from impulsive gambler behaviour. Finally make sure that you find an Islamic Forex Broker to trade with which has swap free accounts, as they ensure that you have access to swap-free accounts. Plus, they will be able to answer any concerns that you may have about trading and keeping it halal.

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Because many online brokers now offer Islamic trading accounts Halal for Muslim clients, there are many options to choose from. So if you feel that forex trading is halal and acceptable for you, you may want to open a trading account. However, you need to choose your broker carefully. There are a few things that you should always check though when selecting a broker. Some leading brokers to offer these accounts include eToro and BDSwiss for example. For instance check the swap-free time frame of each broker plus the minimum deposit amount. Regulation means that a platform is authorised to function as a broker service, and they hold regulation licences from financial regulatory authorities.

Regulation is important because it helps to keep you safe against financial scams and fraud. Cases of fraud has unfortunately happened with illegal and unregulated brokers. By being regulated the broker must follow strict financial rules put in place to protect traders against these threats. They told me that they do provide accounts for Muslims. If you wish to trade interest-free you will incur an additional charge of 3 dollars per lot traded round-turn on the regular account. Thank you for your. All perfect praise be to Allaah, The Lord of the Worlds.

We have already clarified in previous Fataawa, among which is Fatwa , that it is not permissible to transact in accordance with the money leverage system, and that it amounts to a loan that brings benefit for the broker because he gets profits as a result of being a mediator through whom the debtor takes loans, and therefore it consists in Riba.

The fact that the mediator receives the same commission whether or not the investor transacts in the money leverage system does not legitimize transacting in it as we have clarified in Fatwa It should be noted that doing business with the Forex system involves many violations of the Islamic law, like Riba, but if the company provides a system that is free from such violations and the condition of exchanging hand-to-hand is met during the conclusion of the transaction, then it is permissible to trade currencies, gold and silver; otherwise, it is not.

Allaah Knows best.

Using the leverage system in Forex transactions Fatwa No: Impermissible to Use Someone's Place without Permission. Government Provides Conditioned Subsidy for Business.