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Speculative Trading
Is it Islamically ok to be involved in speculative stock trading (taking positions on the market without any underlying reason or fundamental analysis). Lot of scholars consider this type of trading prohibited in Islam, as it is considered to be based on chance, and not on actual economic activity.
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3 Replies
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Speculative Trading
updated 1 year, 9 months ago
2 Members
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Replies
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In the world of finance speculative trading does not mean blindly taking positions without any analysis.
Investment and speculative trading differ in their objectives. Investment is a long-term strategy which relies on fundamental analysis and focuses on capital preservation or growth. Speculative trading is relatively a shorter term strategy that mainly relies on technical / sentiment analysis and aims to benefit from price fluctuations in a short duration.
All kinds of trade are halal except those that may involve something immoral or unjust. If those aspects are avoided then there is nothing wrong with speculative trading.
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So it means benefiting from price fluctuations in a short duration is ok. What if that involves using too much leverage (let’s say 50 times the capital) in an attempt to make big profit in a very short duration of time? Wouldn’t that be considered gambling or atleast closer to gambling since the person is trying his luck with such a big investment and risking losing big chunk of money in that attempt.
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Duration, amount of risk, and price fluctuations are not factors in determining whether or not something is a gamble. It is the fact that purely on the basis of chance someone attempts to gain money that he has no moral right to.
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