Regulations are important for all traders when choosing from a list of the best Islamic Forex brokers.
Regulations will guide, restrict, and instruct brokers on how to administer accounts. The relevant regulatory bodies will protect traders from fraud or any other illegal misconduct. It is common that the top Islamic Forex brokers are compliant with more than one regulatory body. Also, there are certifications for Forex Islamic accounts in Halal.
A swap is a fee that is charged to those who leave a position open for more than 24 hours. It is a type of interest and therefore, it is not allowed for those who comply with Sharia. The solution for most brokers is to apply fixed fees or commissions on Islamic trading accounts that maintain longer-term overnight positions.
Some brokers will only allow you a limited amount of time in which you can trade swap free. This is known as no-swap or swap free periods. Only the better Islamic Forex brokers will allow unlimited swap free trading. It is always important to read the terms and conditions published by any Islamic Forex broker because that is where the small print is. For example, the broker may not charge an interest rate, but there will most likely be a commission instead, so it is important to be sure of all such terms as these will probably affect your cost of trading when you open an Islamic trading account.
According to Sharia law, there are a number of prohibitions applicable to Islamic traders. These reflect Islamic guidelines aimed at ensuring a prosperous and peaceful community. The major prohibitions are outlined below:. Overnight rollover is the interest that a trader is charged or sometimes paid for holding a position overnight.
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As an Islamic trader you will probably be charged a fixed commission per trade instead to make up for not being charged a commission. It is important to note that in most cases, each currency will have a different interest rate and therefore most likely differential commission rates, so it might be a good idea to look at the applicable fee before opening a position in a particular Forex currency pair or cross. A margin deposit is an interest based on the cash deposit made with a Forex broker, which a few brokers offer to larger clients.
Since margin trading involves a higher risk, the trader must present an initial amount before opening a leveraged position. Those who are compliant with Sharia law may not receive or give loans with interest. The Riba principle is broken by any trading on margin because margin involves the loan of money at interest given out by a lender who seeks benefit. Short sales in the sense of shorting an equity go against the Gharar principle because a true short seller is selling something they do not own. A forward sale is an agreement between two parties to buy or sell an asset at a specified price at a future date.
Again, it is contrary to the Gharar principle. In order to open an Islamic Forex account, you might be asked by the broker to present a few documents, such as your ID and a document as proof of your faith. An Islamic trading account attempts to apply Islamic Sharia law to online Forex trading. Therefore, it is for Muslims; those who wish to follow the teachings of the holy Quran.
The Quran prescribes a religious law known as the Sharia that has certain rules on how humans should live in society. It includes principles of behavior on finance, family matters, nutrition, and more. Both Halal and Haram are terms that are applied by Islamic doctrine to all aspects of life.
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Haram means anything that is forbidden by the Islamic law. Halal, on the other hand, are all the practices that are allowed by the Sharia. We have examined this question elsewhere in detail. Islamic accounts can offer any markets for trading if the asset itself is compliant with Sharia law, as long as the basic principles against Riba etc. However, some assets are not. For example, an Islamic account could not offer trading in the shares of a company which manufactures alcoholic beverages as such beverages are forbidden in Sharia and no Muslim should profit from them.
One of the best advantages of Islamic accounts is that those who are Sharia compliant can trade without going against their beliefs. Also, without any swap fees, traders can go a long time without being required to make any interest payment. Another benefit is the Mudarabah Agreement where both parts will share profit and loss. A potential disadvantage of an Islamic account is that you may sometimes need to pay quite a lot in commission in place of overnight swap fees.
Malaysia is an emerging Asian economy, and Forex trading is gaining popularity there. While all brokers are allowed to accept traders from Malaysia, those holding a CMSL offer an additional layer of security and a dispute resolution mechanism that can hold the broker accountable in case of malpractice and fraud. The SCM maintains a Public Register of License Holders on its website, and traders may check the Malaysian website of their preferred international broker and cross-reference the given license number with the SCM database. Some confusion exists over the legality of Forex trading in Malaysia.
It is legal for Malaysians to trade with offshore brokers, as long as they are compliant with domestic laws. There are three things Malaysian traders should seek from their broker. Primarily, an Islamic account compliant with Sharia law. It is essential to read the terms and conditions carefully, as sometimes the minimum deposit is increased, or the swap-free offer is time-limited. Local bank transfers in the Malaysian Ringgit will ensure easy money management to and from the broker, while mobile trading remains a fast-growing trend across the Malaysian retail sector.
An Islamic trading account is a trading account which operates in compliance with Islamic Sharia law. Islamic trading accounts have certain principles they must adhere to in order to respect Islamic social fellowship.
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Trading Forex through an appropriate Islamic Forex trading account can be halal not haram. A swap free account in Forex means that you will not be charged or paid swap interest if you decide to keep a trade position open overnight. You will be charged the difference, more or less, another way, most likely by commission. I believe that Technical Analysis offers the cleanest way to predict the future direction of price movements.
The fundamentals and news create the market sentiment and emotions, and that in turn is reflected in the price chart. Best Islamic Forex Accounts. Advertiser Disclosure. Affiliate Disclosure DailyForex. Huzefa Hamid.
5 Best Islamic Forex Accounts for • Benzinga
Table of Contents. What is an Islamic Forex Account? The Mudharabah Arrangement. Musharakah Arrangement. How to Choose an Islamic Forex Account? Islamic Prohibitions. Overnight Rollovers. Interest on Margin Deposits. Margin Trading.
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