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2022-07-19 • Updated

Is Forex Trading Halal?

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Can Muslims trade Forex? This question may be of specific interest to the religious people that want to make sure that they do not violate any Islamic laws. Even though the question may seem complicated at first, there is a quite clear answer to that. And today, we will try to sort this question out for you.

Forex trading: gambling or not?

The first thing that comes to mind is that Forex may be considered gambling and, therefore, it would be against the tenets of Islam. And while gambling in the core is a non-halal activity, Forex itself is a bit more complex than that.

Let’s have a look at the definition of gambling. In Islam, gambling is seen as speculation where the participants have almost no control over the result and, therefore, there is no chance to see if the odds are in the participants’ favor.

Forex, to a degree, may bring a shadow of uncertainty. However, at the same time, Forex is more than speculation. It requires skills and research, thorough market analysis and making trading plans, setting goals, and reading forecasts. Just like any other trading, Forex can be approached wisely and in a controlled manner.

Thanks to their experience and knowledge, traders may hedge out the risks and be more sure about the outcome. Moreover, traders invest their time and effort into Forex trading, they learn, and they apply strategies, so what they do is a productive activity.

It is worth mentioning that not only individuals participate in Forex, but also banks and businesses. They do it to hedge out their risks, so in some way, Forex is what helps businesses flourish and grow.

A halal way to trade Forex

When you choose Forex trading halal, it means that your trading abides by Islamic laws. So if you have a closer look, halal trading starts with traders themselves. By letting greed and desire for quick and easy profits settle in their hearts, traders may be caught in a situation when Forex starts to be a non-halal activity for them. So the first thing to consider is how you feel about your trading.

One more important point is to treat trading right. This is not a game or gambling; this is more like a business. That is why remember to calculate your risks and rewards and conduct proper risk management. It would be a good thing to turn to fundamental and technical analysis. Overall, Forex needs to be approached smartly in any case.

Another thing you should consider is the payment of interest. Let’s have a closer look at it below.

Interest-free trading

In Islamic law, there is a rule of “riba”, which prohibits the use of specific interest or fees. The Qur’an considers interest unjust for the persons paying the riba. That is why to keep your trading halal, you need to use a Forex account without interest.

Important to mention that FBS broker understands the need for Muslim traders to trade Forex halal. That is why we make interest-free trading that follows the Islamic principles possible. Here is how it works.

With FBS, you can trade Forex with a Swap-free option that can be activated for your FBS account. Swap is the money you receive or pay for holding a position overnight. The Swap-free feature means that there are no charges of swap commission (positive or negative) for overnight positions.

That is how you can trade Forex halal with FBS.

Advantages and disadvantages of trading Forex halal

As we already pointed out, for Muslims, Forex may have some issues regarding religious beliefs. On the other hand, Forex trading halal way may have benefits too. See how it works.

Advantages:

  • Muslim traders have access to the financial market where they can build capital by trading wisely on the market moves.
  • Forex brokers pay attention to the necessity of traders to have special Forex accounts and create them.
  • Muslim business owners who work with foreign currencies can conduct Forex operations to hedge the risks.

Disadvantages:

  • Forex may potentially turn into a form of gambling if a trader becomes greedy or risky.

Generally, the pros outweigh the cons, so trading Forex can be a good activity that may stay halal for the whole time of trading, depending on Muslim traders themselves. Also, it is another proof that Forex trading halal is possible.

More major points to consider

If you think that Forex trading is not for you because it may fall into a haram activity, look at it this way. Many brokers, including FBS, make special accounts for Muslim trading. It means that more and more Muslim traders want to try out the currency market. And quite possibly, many of them have the same question: is Forex halal or haram?

There is a high chance that many of them find a way to make their trading abide by the Islamic laws because religious laws are of sacred significance to them. It means there are ways to build your trading activity in such a way that it will always be halal.

Summary

While Muslim scholars still may be doubtful about whether Forex trading is halal or not, it is in the hands of a trader to make trading activity Sharia-compliant.

As Sharia law forbids gambling and excessive risk, the goal of Muslim traders is to make the trading process devoid of these two things. So use a profitable strategy, apply risk management, and, if possible, trade on an Islamic account. It will help you to trade Forex in a halal way.

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