Forex trading is not permissible under Islamic law. When the teachings of the Holy Qur’an declare anything “haram,” or forbidden, it becomes haram for its followers. According to Islamic law: Gambling and riba are 2 practices forbidden by the Holy Qur’an.
Let’s start with: Is Forex Trading Halal? Forex trading involves interest and gambling. Such activities are against the teaching of the Holy Quran. So forex trading is not HALAL according to the FATWAS of Islamic scholars.
Forex trading is getting popular in the trading world. But the Muslim world is not allowing it as a legal trade. Let’s try to know the explanations of Islamic scholars:
Is Forex Halal in Islamic Shariah
Several states and the Islamic International Fiqh Academy (IIFA) have declared Forex as haram because it violates shariah.
Who took this decision about forex trading:
- In February 2012, the National Fatwa Council made the decision
- Perlis (2016)
- Negeri Sembilan (2018)
- Sabah (2012) agreed to forbid online forex trading through a fatwa.
Is Forex Halal In Hanafi
According to Mufti Taqi Usmani ( a notable modern Hanafi scholar and Islamic financial expert:
Forex trading is strictly forbidden due to many negative features involved with this type of investment. For detail, you can see the answer here.
Read this article: Is Forex Trading Halal?
Is Forex Trading Halal In Islamic Point Of View
Forex trading is prohibited, according to the Islamic Fiqh Council. The so-called Islamic Forex, or most of it, is not susceptible to the basis for the prohibitions of Forex trading. Now see the complete reply for additional details.
Islamic Point Of View on Forex Trading Margins And Leverage:
Forex trading involves margins and leverage. As such factors are haram in Islam. So Islamic Fiqh Council has released a letter stating that it is haram and forbidden.
You can get the details of the statement here: 106094.
The Muslim World League’s Islamic Fiqh Council, in its 18th session, held in Makkah al-Mukarramah from 10 to 14 March 1427 AH (8 to 12 April 2006 CE), searched into the matter of trading through margins, that says :
The buyer pays a small percentage of the purchase price as a “margin,” and the agent (bank or indeed) covers the rest as a mortgage, given that the sales agreement is still in the agent’s name as a commitment for money.
Islamic Point Of View About Online Forex Trading Without Capital:
If the trade is clear of the issues described and the user is purely trading by his assets through the Internet, it is allowed, due to two scenarios:
- In buying currencies, that instant change, as allowed by Shariah principles, takes place.
- You are not trading in haraam commodities like stocks, contracts, securities, combinations, or haraam stocks.
Islamic Point Of View On CFDS Contracts
Now see answers to questions (110938 -83 )and (248794 -45) in the above reference.
We couldn’t receive a detailed overview of trading without capital and through the XM company site. but we should figure out that the CFDs (transactions for variations) on the website are a haraam type of contract. because they necessitate future and options. mentioned in the argument of the Islam Fiqh Council referenced in explanation no. (106094- 204).
Alternatives are not acceptable according to Islamic law, according to the Islamic Fiqh Council in Jeddah, no. 63, which declared in its sixth session that the target of the contract is no property, nor a reward, nor an economic privilege that may be recovered.
Trades for differences (CFDs) are contracts with 2 parties, commonly known as the buyer and seller. The underlying asset (for reference, a stock index, stock, or options deal) at the time of the contract or if the participants start closing the contract sets its price.
The Islamic Forex account offers leverage, making it haraam, as said before.
Visit here to know more: http://www.ifcmarkets.com/ar/cfds/what-is-cfd 49.
Why Forex Is Haram Under Islamic Law: 5 Reasons
As said before, many leading Islamic scholars have given FATAWAS on forex trading. All of the Forex preceding is prohibited by Shariah for the reasons stated:
In currency trading, there is a lot of Gharar (uncertainty). Gharar decides the effectiveness of an open position in which currency has been bet. This Gharar is a part of the real trade and is in the process of a trade. It differs from stock purchases in that it involves the purchase of recognized subject material. As a result, buying stock is a Gharar-free deal.
2. Invalid Service In Shariah
In Shariah, forex trading is not a valid commodity. It is the speculative execution of someone’s asset, which is the source and fact of overall trade. Doubt in stock trading is thus retired, but it is former and constant in FX trading.
One has been betting on the trend of a currency pair’s rise. When one is risking his assets over his broker, it is a Qimar (gambling) deal. The participant who exactly decided the outcome wins money at the cost of another.
4. Delayed Counter-values
Upcoming trades are exchanges of commitments since neither counter-value is existing at the date of settlement. Futures trading is the swapping of one credit for the next, I, For example, bay’ al-kali bil kali, where other counter-values are postponed (a sale of two deferred counter-exchanges). A delayed transaction takes place if both counter-currencies are delayed.
Islamic law says that usury is unlawful. One of the reasons for this prohibition is the potential for forex traders to manipulate exchange rates. Learn why the future of Islamic finance may be found with Forex trading.
5. Forex is an example of Riba
Currency trading is lawful of bay’ al-Sarf due to deals involving rib wi products like currency and from a fiqh point. Which means a contract that depends on some specific conditions and terms.
According to Surah Al ‘Imran, verses 13–132 in the Quran:
“O believers, take not doubled and redoubled interest, and fear God so that you may prosper”.
Receiving or paying interest is deemed to be a major sin in Islam.
Islam prohibits any transaction that is seen as exploitative, and profiting from lending is seen as exploitative.
Many Muslims in Western societies are unaware that there are financial services and products that are compliant with Sharia law, and they, therefore, continue to accrue debts and interest on credit cards, mortgage loans, and bank loans.
Frequently Asked Questions
Is forex trading allowed in Islam?
Forex trading involves margin and leverage. In forex trading, traders have to pay or receive interest in many terms and conditions. This type of trading is against the teaching of Islam. That’s why forex trading is not allowed in Islam.
Is forex trading gambling?
Many people consider forex trading as gambling. Even so, when you hold a longer-term perspective in two currencies, you are going to gamble on the market to go down or up.
Is it permissible to use leverage in forex trading?
Interests (Ribah) in any contours, such as its application in gaining, measuring, giving, and so on, really is Haram, as are all “SPECULATIVE” dealings and affiliations with it. Haram exists in Forex leverage as well as future contracts (that are built on prediction).
To summarize, Forex trading is prohibited by sharia law. So Muslims have concerns about trading forex. Anything that goes against the teaching of Islam is not Halal for its believers.
Even when forex trading is prohibited through Islamic Fatwa, the reliability of FATWA is not questionable among Muslims.
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