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Forex trading in Islam, Halal or Haram?

Forex trading, without a doubt, takes up a huge part of the financial markets worldwide given the number of participants who indulge in trading and of course the ever fluidity of its large liquid assets. Even the biggest markets don’t have nearly as much daily turnover as the FX Market ($5 Trillion a day!); this tends to attract more traders and potential investors to the market on a daily basis. In the light of such possibilities for prospering and making profits, the question remains, how is Forex Trading perceived in Islam? So, let’s explore the issue together.
Forex in slam, haram or halal
Since the dawn of Islam, nearly 1400 years ago, people have had the blessing of this religion to make a living in the form of exchanging goods so long as this process did not negate certain rules and conditions set forth by Islam. According to Islam, one cannot exchange, for instance, euro for euro and take an interest on it - meaning the same set of goods/currencies cannot be presented with various values - because then it would be considered Riba (unjustified interest) under the Islamic rules and therefore unlawful. Furthermore, inasmuch as the currency exchange is done under the same contract at the time it was signed, in other words, a hand to hand exchange, it is allowed to be so, and there is no ruling against it. Another important issue is that Islamic traders are allowed to engage in trading activities, but there must be no postponement in regards to the exchange between the buyer and the seller, it must be done in one sitting.

Certain Forex Brokers, present their Muslim clients with Forex Islamic accounts (Swap-free \ Shariah) for which the traders are not charged overnight interests. Forex Brokers that provide this type of trading need to compensate for their services by charging commissions on forex trades. The permissibility of hand to hand exchange, defined by the decree of Islamic law (Fatwa) and more specifically by the Prophet Muhammad, is also met in the exchange done between the broker and the trader. Two parties exchange goods, which in our case is different currencies, so we’re in the clear and no laws are broken there either. The large liquidity of the FX market is not lost on anybody, in such a widely liquidated atmosphere, exchanges are done within seconds, if there is a buy order, there will definitely be a sell order for it, and positions are filled almost instantaneously. This would take care of the “under the same set of contract” part of the business for Islamic traders.

Islam forbids gambling because it is based on no solid foundations and the parties are betting against one another leaving the results on pure chance. But it would be quite a stretch to put the science of forex trading in the same category as gambling based on a few notions here and there. What we’re trying to say is if a trader does his or her due diligence (based on fundamental or technical analysis) to analyze the market fluctuations and establish a calculated direction for the market, then how can such reasonable speculation be considered gambling? If the Islamic traders are to abandon one analysis, for example, Technical analysis, over another, i.e., Fundamental analysis, and yet at the same time come to a firm conclusion over a price, so the question is, how can they pass a solid judgment on the future price movements with half of the required tools at their disposal? A definite speculation is clearly based on not one but a mixture of both analyses. Well, we can only present you with the facts as they are, you can then decide what the right course of action is based on your own power of reasoning!