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Forex Trading
Aoa. Please read my question in detail. You might have answered my question already to someone but the scenerio i am about to present about the nature of forex Trading, kindly answer me accordingly. I’d be very thankful to you. Jazakallah.
(Question)
I was reading the School of Pipsology(a website which teaches about forex in detail).and then I came to know that there is nothing like a Non-Dealing Desk Broker (STP, ECN, or DMA).
I learned that our trades are not executed in the original market. We are not buying or selling original currency pairs; it’s full of guesses and speculation.
I used to think that we are buying the original currency with leverage and selling the original currency with leverage, similar to what we do in the stock market (buying and selling original stock with leverage/margin, and our trades are directly executed in markets like the New York Stock Exchange, National Stock Exchange, Bombay Stock Exchange, etc.).
If we are not buying or selling, and it’s full of guesswork and speculation,it is called gambling.Since we are not actively participating in the market, rather we.are kind of making a bet with our broker, whether the price goes up or down. If i win i get profit and broker gets a loss. So this is a one on one interaction with an entity rather the whole dynamic market of foreign exchange. So in short, the only way for normal human beings who are not millionaires and they want to participate in foreign exchange market,they can only do so by getting in touch with retail brokers.If it’s true, then forex is nothing but well-glorified gambling.
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Casino (Guessing, Analysis with Math & Luck) = Forex (Guessing, Analysis with Math & Luck)
However, a casino is considered bad gambling, while Forex is considered a business (indirectly glorified gambling).
The Main Question is, that i am making a bet with my broker, but i am also doing hardwork ,as i spend all my day just reading the charts and doing technical analysis. If someone is doing hours of hardwork in forex( even if its gambling) would it still be sinful.
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5 Replies
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Forex Trading
updated 1 week, 4 days ago
2 Members
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5
Replies
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If you do long term investment in forex it is definitely allowed from islamic point of view. In the short term like exceuting trades in hours, minutes or days etc, you are not doing anyone a harm but participating in a game where things are almost random. But in the short term the issue is that you have to be very very skilled and smart players otherwise the big sharks will eat your lunch and you will lose the money. So for your own financial safety and well-being islamic principles led alteast me to think that if you are not highly skilled and learned from a good trader company or institute, your participation in such a market would be against the Islamic principles.
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That does not answer my Question.I am talking about the nature of our interaction with retail brokers and our way of earning money ( which is like making bets against them and not really participating in the market). Not scalping or intraday trading.
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I understand but the principles are same. Even through a broker you are trying to predict the movement of the market but your broker is basically the extended version of the market. I would still argue that even in the broker version if you are highly skilled and know your field inside out then you are good to go in terms of Islamic principles, but if you have no skills, does not have financial knowledge and industry education then you are definitely gambling and hence against Islamic principles.
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I believe you personally want to focus on the mini part of my question and want to neglect the remaining whole of it. So lets leave that for that moderators to answer.
As you said Mr Saleem, yes it is quite obvious that to participate in the biggest market ever where there is immense liquidity, either you would gamble or make money smartly. You talked about big sharks, so remember that there are smart fishes as well to deal with them.
But still even a gambler knows his field inside out and does some analysis and calculations. Similarly in forex, the one who draws nothing might get a profit,and the one who applies several smart money concepts on the chart,does hours of technical and fundamental analysis ، there is no guarantee that the market would respect him. Which is the same like gambling.
As far as morality is concerned,the one who randomly executed an order and keeps doing that to make small profits randomly by keep his win reward ratio in such a way that he remains consistently profitable,he would still be a gambler.
The one who does hours of analysis for the same thing would not be a gambler.
But my Question still remains un answerable, which is that we are actually not trading rather betting on. Everything i asked about was brokers.
I hope i have cleared your point and agree that without learning it would obviously a immoral and stupid thing to make money from the market.
And you said brokers are an extended versions of the market. Kindly explain on that
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Before laying my arguments and also the view that broker in your case is an extension of market, let me say that I am not an active expert in forex and finance markets NOR an Islamic expert who has studied these issues, what I know about these issues is due to my interest in the scientific nature of these markets and how they deal with the economics and capital allocation, and especially the efficient market hypothesis etc.
Now on my view of broker as an extension of the market rather then a gambling partner between some players. I am arguing from the big picture that large brokers who also participate in the market, do what we call market making, even in stocks market you are holding the stocks of a company because big players are providing liquidity and market making, in the forex area the difference is that the broker which is a big player assumes the role of the market and tells you his believe in efficient market hypothesis and that market is random. By acting as if he is a market he is basically providing you the chance to prove him wrong that market is efficient and hence you make money and he loses it. The operation between you and broker looks like sort of gamble, but if you zoom out and see the big picture, these brokers are providing you liquidity and chance to exploit the assumption of efficient maket hypothesis and hence make money. There assumption is that market is efficient and small players have no chance of exploiting it, your assumption is that you can exploit and there are opportunities.
Your own success in the market can be made on gambles but keep in mind that chances of such successes mathematical are very very low, hence there must be some structure you are basing your trades on which is not a gamble and in my view a skilled and knowledgeable player even if he is small player is not a gambler but a technical exploiter, which is fair game and not against any Islamic principle. Again, I am stressing the part of knowledge, skills and training which in my view holds the key in these complex question of permissibility of financial trades in view of Islamic laws.
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