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Halal Day Trading and Islamic Accounts in Russia
Is day trading Halal or Haram, and is there such as thing as an Islamic trading account on the financial markets? With one-quarter of the world being Muslim and the development of online trading, the question of where intraday trading fits in with Islamic law is increasingly being asked. This page will consider numerous viewpoints and sources in order to answer whether day trading is halal or haram. It will break down forex, stocks and binary options in particular, and try to offer guidance on how to stay Halal.
Islamic Trading Accounts in Russia
Is Day Trading Halal?
Islamic principles govern many aspects of a Muslim’s life, from social to economic matters. All of which are outlined in the Koran and by Sharia Law, which quite literally means ‘pathway to be followed.’ When it comes to day trading though, black and white lines can quickly become grey.
One of the biggest concerns centres around the risk sharing element. An element which is regulated through principles such as Bai’ al ‘inah (sale and buy-back agreement), Bai salam, Mudarabah (profit sharing), Bai’ muajjal (credit sale), Bai’ bithaman ajil (deferred payment sale), Murabahah and Musawamah.
So, in the case of forex, stocks, binary options, futures, commodities, and currency, is investing haram or halal?
Please note that this site is not a religious authority on the subject of Islamic day trading. If you want to be certain that your trading activities are Halal, we recommend that you consult with a religious authority that can consider your individual situation.
Is Buying Shares Halal?
It is generally accepted that buying stocks is not haram. This is because you are simply owning a percentage in a business. However, you do need to be sure the company in question is not dealing in a un-Islamic manner. Companies like Guinness (alcohol) and Ladbrokes (gambling), for example, would not be allowed.
You can break down companies form an Islamic perspective into three categories:
- Shares from permissible practices – Shipping, manufacturing, clothing, medical equipment, real estate, tools, furniture, supplies and so on are all free from haram practices or transactions, such as cheating and borrowing on the basis of riba (unjustified lending). These companies are also known as ‘clean’ companies.
- Shares based on prohibited practices – Any company that deals in tourism, alcohol, hotels, nightclubs, pornographic materials, riba-based banks, commercial insurance companies, etc, is not permissible. In these circumstances the stock market is haram.
- Shares based on partly haram practices – Whilst the majority of the work may be permissible, some practices are haram. Transportation companies, for example, hold interest based-bank accounts and are often financed by riba-based loans, or individuals through stocks. These types of companies are known as ‘mixed’ companies.
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So, what do you do if the company deals in goods and services that do not agree with Islamic law?
You do not invest. If you want to avoid any potential conflict the easiest decision is to avoid buying and selling shares in the stock at all. Having said that, there remains some wriggle room. In some cases, you may still be able to trade and remain halal.
Most Scholars are in agreement that if the company only deals in a fraction of un-Islamic goods and services then you may still invest. It is suggested that you simply give away the percentage of the profits that are created by the haram section of the business. So, if 10% of the company’s profits stem from alcohol, you’d donate 10% of your profits to a charity.
The other major area of concern centres around interest. You shouldn’t be trading in interest, so ideally you’d exchange £25 for precisely £25. However, that may not always be feasible. As the stock price varies you inevitably end up paying more or less than face value for the debt/cash.
For example, if the company has just £2000 in cash and that makes up the majority of its value, and the stocks trade at £75,000 in total, you’re paying more than the face value.
Fortunately, it is relatively straightforward to stick with just halal shares. Most scholars agree you simply need to avoid companies where a considerable amount of their stock value is tied to large piles of debt/cash. Instead, opt for companies where the value is derived from their broader business.
You can actually find Islamic stock screeners that will identify halal stocks for you. However, such software is relatively expensive. Alternatively, most platforms allow you go get a screenshot of the company, highlighting their debt levels and market capitalisation.
For the most part, common sense is your greatest weapon. Avoid heavily leveraged companies that are concerned with the buying and selling of haram goods and services. So, in summary, whether stock trading is halal or haram, entirely depends on the companies you opt for and how much profit you retain.
Is Currency Trading Halal?
Forex trading is increasingly accessible and the potential for quick money draws more traders in every day. On the surface, this looks like one of the halal investment opportunities as you’re simply buying and selling money. However, dig a little deeper and you might wonder is forex trading actually haram?
If you were to buy £4,000 for $2,5000 and sell it six months later when the pound appreciates against the dollar, then this is a halal transaction. But in reality there remain several issues.
To make substantial intraday profits from tiny price movements you need to invest large sums of money, thousands, if not hundreds of thousands of pounds. So, to alleviate this problem forex brokers offer you leverage. In effect allowing you to invest £50 or £75 for every £1 you put up. You can now take much larger positions and increase your profit.
However, this is in effect a loan. In Islam, it is permissible to borrow from someone for the purposes of investing to make a profit and then return that loan interest-free to the creditor.
However, with forex brokers, they are lending you the money for the sole purpose of taking a commission. Effectively they will make a return on every trade. Many scholars consider this a form of interest, making trading forex haram.
Fortunately, Islamic forex brokers have responded by providing day traders with an alternative. You can now get forex accounts which won’t charge you standard interest payments. To remain profitable they instead charge increased commissions in spot forex trades.
Whilst some suggest this is simply a disguised interest component, many scholars are content with this new method of facilitating trades. Any ‘regular’ spot forex trading offered by brokers with no overnight charges could well clear the riba obstacle.
Hand To Hand Exchange
With the interest element out the way, the next issue relates to the exchange itself. Trading is permissible ‘so long as it (exchanges) is hand to hand’. This shows the prophet Mohammed obviously had in mind commodities would be exchanged between two parties, as a natural part of commerce.
In the past, most deals would have been done face to face, but with the evolution of e-commerce what constitutes ‘hand to hand’?
Many argue the deal is made between the broker and trader, which would qualify under the definition of two different parties, and therefore halal.
Scholars have gone further to say the actual exchange must take place in the same ‘sitting’, when the contract is made. So, trades must be entered and exited almost immediately, which with forex traders they usually are. This could perhaps mean though that non-market trades such as stop and limit orders are in fact haram.
Another part of the answer to ‘is forex trading legal in Islam?’ centres around ownership. You are merely speculating whether the value of the currency will increase or decrease, so is this halal?
This is difficult to answer definitively and it may be something you want to seek specific religious advice on.
Many are in agreement with several factors surrounding forex that may answer the question. Islam recognises the need for humans to want to improve their lives, including their financial situation. We all must consider implications when confronted with choices and use intelligence to respond in such situations.
So, whilst we know gambling is strictly haram, you can find halal forex brokers who have made every effort to keep any activities strictly within the confines of Islamic law.
Is Trading Binary Options Halal?
Unlike other forms of trading, binary options offer more straightforward trades then a lot of other instruments, such as stocks and forex. The option will either pay out a fixed amount of compensation if the option expires in the money, or it will pay out nothing if the option expires out of the money.
If the trader has little knowledge of what and how to trade, then to trade binaries would be a form of gambling, and not halal.
On top of that, because each contract must have a winner and loser, this is arguably not halal. For not every party can profit or extract value from the trade. So, it’s worth noting that many consider binary options fundamentally haram.
Having said that, there is also a growing school of thought that only the individual trader can know whether trading binaries is halal or not. If you understand the complexities of the trade then perhaps you are not gambling. So, despite numerous brokers offering ‘Islamic’ accounts, only you can truly know whether you are acting within Islamic parameters when you trade binaries.
Islamic Trading Accounts
It is clear that halal online trading will depend partly on your actions and partly on the broker you opt for. Whatever your online Islamic investment, be it stocks, forex, or options, for a broker to claim they offer accounts based on Islamic principles, they need to meet the following criteria:
- Immediate execution of trades – Cutting out the delay helps satisfy the rule of prompt hand to hand exchanges between two parties.
- Immediate settlement of transaction costs – Be wary of accounts where open trades are automatically rolled over to the next trading day, as they may incur interest charges for the rollover.
- Zero interest rates on trades – To avoid breaking rules around riba, there must be no interest. Any interest will deem the contract invalid and not halal.
There will always be a divide in opinion as to whether day trading is halal or haram. It must also be noted that despite in-depth research into numerous sources, this page is not trying to offer readers religious advice. Instead, it looks to collate viewpoints and present them in an easy-to-digest format.
Whilst there certainly remains a substantial number of people who conclude Islamic day trading is halal, perhaps the best steps you can take are to choose your broker carefully and evaluate your trade decisions with the parameters of halal in mind.
Halal Binary Options and Islamic Trading Accounts
Is Binary Options Halal and compatible with Islamic traditions? This has become an important question for prospective Muslim options traders as the financial industry has become available to everyone through online trading accounts. Here we look at the implications of Sharia Law on binary options trading and whether it is “Halal” or “Haram”. The development of online trading in the financial industry in the last two decades has opened up new horizons for retail traders of all races and creed. With one quarter of the world’s population being Muslim, it is inevitable that more and more Muslim traders will join the online Islamic binary options trading scene. In Islamic economic jurisprudence or Shariah law, charging “Riba” or interest is forbidden and is considered as a major sin. Many brokers in sensing an opportunity that will benefit them as well as their Muslim traders came up with the idea of “Halal”, or Islamic, trading accounts.
Halal Binary Options Brokers in Russia
These brokers are marketing specific account types they operate as Halal and compatible with Islamic tradition and Sharia Law.
Is Binary Options Halal or Haram?
The life of a Muslim is guided by Sharia Law. Sharia is actually an old Arabic word meaning “pathway to be followed“. A Muslim is expected to abide by the Islamic principles covering all aspects of their life from social matters to economic matters that were expounded in the holy Koran. In the area of banking and investments, Sharia law strictly forbid the lending of money with interest. Investments in the Muslim world are instead governed by the concept of “risk sharing” through principles such as Bai’ al ‘inah (sale and buy-back agreement), Bai’ bithaman ajil (deferred payment sale), Bai’ muajjal (credit sale), Bai salam, Mudarabah (Profit Sharing), Murabahah and Musawamah.
When Sharia law is applied to Binary options trading, this means interest that is earned or charged for an overnight position is prohibited as well. In the spot financial markets, trading is done on a 24 hours basis. By 5 pm New York time, all open market positions are then rolled over to the next 24 hours cycle. Daily interest is then added to the broker’s account. Regardless of whether the binary broker debits or credits their clients’ accounts with the interest like forex brokers, the fact that interest is earned or payable during a trading transaction makes the trade “haram” to Muslim. This situation puts Muslim traders on a collision course with their religious beliefs.
Islamic Trading Accounts
In order to overcome this dilemma, some innovative binary options brokers have come up with the idea of an Islamic trading account or “Swap Free” account that eliminates Riba of any form during trading. For example, instead of having an open market position rolled over automatically making overnight interest payable, open positions in Islamic trading accounts are closed by 5 pm New York time and then reopen immediately hence avoiding any interest payable for the fresh 24 hour cycle.
For a broker to be able to claim that they offer trading accounts based on Islamic principle, these accounts must satisfy at least the following conditions:
- Immediate execution of trades
- Immediate settlement of transactional cost
- No interest payable on trades
To help traders in their selection of brokers that offer Islamic trading accounts, we have compiled a list of leading binary brokers that offer Islamic trading accounts. It should be noted that the list above is by no means exhaustive but is just a guide.
If someone used a Halal binary options account, but had little or no knowledge of what or how to trade, then they would be using binary options to gamble – and this would certainly be Haram. Only the individual trader can know whether this is the case.
There is also a view that because each contract or trade must have a ‘winner’ and a ‘loser’, this means that binary options cannot be Halal, as it is not possible for all parties to profit, or extract value, from the trade. While some brokers will offer “Islamic” accounts, and take steps to ensure they are run to islamic principles, there will always be some who view the entire concept of binary options as Haram.
Halal Binary Options Trading with Islamic Trading Accounts
by Oscar J. July 28, 2020, 4:07 AM 1.4k Views
Halal Binary Options Trading and Islamic Trading Accounts for Muslim World
What is halal binary options? Is binary options trading is halal according to the law and tradition of Islam? These are the biggest questions for the Muslim binary options traders who can trade binary options through online from anywhere in the world. Here in this post, we are going to discuss the Sharia Law implication on the form of binary options trading. So binary options trading is Halal or Haram?
For the last two decades after the rise of online trading, it creates a new era for the retail traders of the financial industry. No matter what are the races and creeds of the traders. Muslims are the one-quarter of the total population of the world. It is expected that if binary options trading is Halal then so many Muslim traders will join to the Islamic binary options trading.
According to the Islamic law known as the Sharia Law, the Riba or Interest is forbidden for the Muslims. It is considered committing a major sin. Many binary options broker take this fact into the count. They established a new trading system which Halal binary options trading. They also put a different trading account for the Muslims and names it Islamic Trading Account. Some brokers sensing it as an opportunity which can benefit them as well as it will be ideal for the Muslim traders.
Halal Binary Options Brokers List
Is Binary Options Halal or Haram for Muslims?
Muslims life is guided by the Islamic law known as Sharia Law. Sharia a very old Arabic word actually meaning “the path of life to be followed”. The Muslims are abode to follow the Islamic rules in their whole life in every sector of their life. It can be anything, social matters, economic matters or political matters, anything. All the rules are found in the Holy Quran.
In the case of investment and banking lending money with interest or taking interest in a fixed rate from invested money is strictly forbidden by the Sharia Law. Risk sharing is not the principle of investment in the Muslim world. The investment principles in the Sharia Law are “Bai’ al ‘inah” or the agreement of buy and sell back, the “Bai’ bithaman ajil” means the deferred payment of sale, the “Bai muajjal” means the credit sales, and the “Mudarabah” means profit sharing. There are few more options for investment like Bai Salam, Musawamah, and Murabahah.
So it is clear that the interests of binary options trading of overnight positions are prohibited for Muslims by the Sharia Law. In the financial market, online trading runs 24 hours. New York time 5 pm all the positions of open market rolled over every day for the next 24 hours trading cycle. Then the daily interest added to the accounts of the brokers.
It is done regardlessly whether the brokers of binary options credits or debits the accounts of their customers with their interest, unlike the forex brokers. In this case, the interest which is earned or payable during the transaction of trading makes the binary options trading Haram for the Muslims. This fact makes a collision with the religious beliefs of the Muslims.
What is Islamic Trading Account?
In order to solve the conflict with the Muslims religious beliefs, some innovative brokers of binary options industry came forward and established the idea of Islamic Trading Account or the “Swap Free” trading account. During the trading, this account eliminates the Riba or interest. As the example, to make overnight payable interest the automatic rollover of the open market is not happening in this account. That means there is no opening at 5 pm in this account.
Instead of this at 5 pm New York time all the open positions of Islamic Trading Accounts closed and immediately reopen to avoid the payable interest for the next 24 hours trading cycle. The brokers who claim they are proving Islamic accounts according to the Sharia Law must fulfill the following conditions.
- Trades immediate execution
- Transactional cost’s immediate settlement
- On trades, there is no payable interest
To help the traders to find out the best binary options brokers who are providing Islamic Trading Account we add a list above. You should note that we are not pushing you to these brokers, it’s just a recommendation from Legit Binary Options Review.
Other Facts to be Considered
If some of you already used Islamic Trading Account without any knowledge or a little knowledge that how to trade with this account, then it would be gambling rather than binary options trading. It is certainly Haram for the Muslims. What is the case the individual trader can know only.
There is another fact that every trade should have a winner or loser and this is not Halal for Muslims because this trade is not able to profit all parties or all parties are not bearing the loss. So take this point into consideration and be sure that the Islamic Trading Account providers really follow the principles of Sharia Law.
Please note that Legitbinaryreview.com is not taking any position whether the binary options trading is Halal or Haram. On this subject, we are not any religious authority. It depends on the skills of the individual trader and it is impossible for us to give you any kind of advice in this matter. For the further details and certifications, you can see the below references.
References for Further Reading
- Question and answer considering Halal binary options trading on the Islamqa.org
- Question and answer considering call and put binary options on the alqalam.org.uk
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