Islamic Forex accounts, also referred to as swap-free accounts, are made for Muslims who follow Islamic principles in their trading activities. Those who believe in the religion of Islam will have to follow some rules following the principles of Islamic finance in all their economic activities, including forex trading. Forex brokers wanted to help them by providing trading conditions that allowed them to trade forex in a way permissible in Islam or, in other words, Halal for Muslim traders. This article will explore the basics of Islamic forex accounts and how they differ from conventional Forex accounts. We’ll also discuss the conditions of applying for an Islamic forex account and the pros & cons of trading on Islamic forex accounts. So, keep reading to know more about the Halal way of trading forex as a Muslim trader.
Islamic Forex Account- What is It?
The account type, named Islamic Forex account, is actually a Swap-free Forex account, which is designed for traders who are followers of Islamic finance principles. Islamic finance principles prohibit earning or charging interest (referred to as riba in Islam) as it is considered unethical and exploitative. Therefore, conventional Forex trading, which involves the charging and earning interest on trade positions that are kept open overnight, is not permissible under Islamic finance rules and principles. Islamic Forex accounts comply with these principles by eliminating any interest-based transactions.
In place of interest, Islamic Forex accounts use a commission-based system, where traders pay a pre-agreed fee to the broker in lieu of the interest that would have been charged in case of trades that are open overnight. Islamic Forex accounts also have additional restrictions on trading activities, such as prohibiting trading in currencies of countries that are under economic sanctions and banning speculative trading activities. A growing number of Forex brokers offer Islamic Forex accounts to meet the needs and requirements of Muslims who intend to engage in trading forex while adhering to Islamic finance principles. Read More