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Forex Trading
Forex trading
Aslamualikm, I want to ask about forex trading is it halal or Haram according to Islamic point of view.
please especially focus on the point that’s in forex there is speculation so what Islam says. Thanks
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19 Replies
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Forex Trading
updated 1 year, 1 month ago
10 Members
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19
Replies
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Forex speculation and hedging is a way to manage risk of forex differences at a given point in the future. Assuming it’s an open market based on real supply and demand i don’t find anything unfair here. There must be something unfair to make it a sin.
Usually there are players in the market who artificially influence prices in their favor by hoarding currency stocks or using some other unfair techniques. This kind of practices will make it a sin.
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Following principles need the considered on a case by case basis for activities which are primarily not objectionable:
(Ghamidi Sahab has discussed forex at the end)
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بہت اعلیٰ
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I think Ghamidi Sb is discussing exchange of currency here I would like to know the ayat whether trading in currency is disallowed
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There is no such verse in the Quran that explicitly prohibits trading in currency.
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The point I’d like to make is about Trading in Monies or Currency which I understand is forbidden as Money or Currency is a medium of Exchange only
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There is no inherent prohibition of trading money or currency in Islam. Of course if there is any immoral aspect that can be pointed out in such transactions then they could be deemed as prohibited.
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I am still confused, Ghamidi Sb seems to include and describe it as a grey area. Is there any categorical answer available on this?
The main issue is the speculation/prediction about the market, those who speculate it will pump buy and those who speculate it will go down sell.And then the profits and losses are set according to how the markets respond to their prediction. Kindly clarify this point if possible. @Irfan76 @ukhan
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Forex trading done in the normal course of business is not objectionable, but if hoarding of currency (or any other immoral means) is done to influence exchange rates irrespective of the consequences to the economy or other individuals, then this is definitely an immoral way to make gains and should be avoided by an individual Muslim. Usually states have strict regulations in place to counter this kind of currency hoarding. As long as there is no element of deceit/fraud/usurpation of other’s wealth, there cannot be any objection on Forex trading done in the normal course of business.
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There are Lots in Forex trading which means the lot size you select, your profit or loss gets multiplied by that, is it allowed. For example: I take a trade and take the lot size of 5, if my prediction is correct than my profit will get multiplied by 5 and similarly in case of loss.
Is it moral? Ethical?
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There is nothing immoral or unethical about it. Lots are simply units of trade, just like kilograms.
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Thanks, so that will make scalping completely ethical and permissible as well, right?
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I do not see anything unethical or immoral about it in general. Keeping the principle in mind that unduly usurping the wealth of others is strictly prohibited in Islam, each person should decide for themselves.
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Can a person keep his money in dollars in a digital crypto wallet because if he keeps it in rupees in the banks, the value will depreciate quite considerably. Is this also hoarding?
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Yes. Islam deals with moral / ethical aspect of things. It is not concerned about how someone chooses to keep their money.
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I am still confused about some issues. Here are the two main issues I found in FX Trading:
1. In online forex trading, you never buy or sell anything physically. It is just based on the current market rate that profit or loss is calculated and applied to your account.
2. In online forex trading, you can sell currency without the actual ownership. For example, you created an account and deposited 100 EUR, now you can sell dollars, gold and other currencies. Is this allowed? Can we sell something which we never owned/bought in real.
I would appreciate it if someone could clarify these issues.
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There is no prohibition for trading non-physical items in Islam. When you pay for digital content (e.g. online courses, books, movies, and music), they are not physical either. There is also no stipulation for owning a physical item before trading it. For example, real estate brokers and insurance agents do not own anything. Same is the case for many service companies, for example, eBay, Uber, etc.
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@faisalharoon could you please explain online forex trading in the context of CFDs(Contract of Differences) where one can sell and purchase currencies, socks, EFTs, and Indices without owning them or having possession? In CFD one can open a big volume trade with the help of the leverage provided by the broker. So could you please explain online forex trading in the context of CFD and leverage? and short selling is also a very important element of online trading. Please explain the status of short selling as well. Thank you.
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Having a possession of something in order to trade it is not an absolute requirement in Islam. Prophet Muhammad SAW suggested it in the context of physical items in order to minimize any chance of misrepresentation. Similarly, there is nothing inherently wrong in trading CFD’s or using leverage. Armed with the knowledge of principles highlighted in previous responses, you can determine the permissibility of your particular type of trading.
With that said, one must keep in mind that trading financial markets is an extremely competitive field and most people lose money in doing so. If you still decide to try it out, please do so with caution.
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