Forex CFD Trading

[Umer]

1). Islam does not say that one can only do business on the assets which one’s own and possess. Islam says to not devour others’ wealth via unfair means (as per Quran 4:29). While applying this directive, Prophet (sws) prohibited many transactions which had an element of deceit and damage in them, including selling of something before its possession is taken. While many scholars consider it to be an absolute directive, we consider it an applied directive based on economic environment of that time. Current economic transactions need to be reviewed in the light of current economic environment; and if the legal environment and industry standards have eliminated or significantly reduced the element of deceit and damage from a particular transaction that was otherwise declared prohibited, then there is no need to consider such a transaction prohibited in today’s time as well.

Therefore, the condition of physical possession for conducting a trade is not an absolute requirement according to Javed Ahmed Ghamidi Sahab. Prophet Muhammad (SWS) suggested it in the context of physical items in order to minimize any chance of misrepresentation. There is no prohibition for trading non-physical items in Islam. If it can be ensured that the business is conducted in a fair manner and there’s no deceit then it can’t be deemed as prohibited.

Please see for details on this point:

Discussion 61620

2). Regarding using leverage for CFDs:

Specific loan given for a specific purpose with certain conditions do not make it Riba on its own. Riba is the amount charged on loan as a profit. If swap free accounts provide a way to eliminate the risk of Riba then it is recommended to opt that option.

Also In Ghamidi sahab’s understanding of Islam, lending money on interest is strictly prohibited, however, it’s not impermissible to borrow money on interest. Please refer to the following discussion for details:

Discussion 30863

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For comments of Ghamidi Sahab, Please refer to the video below from 23:37 to 25:47

https://youtu.be/Oh55zJDO970?si=Vht2LU2BOih7sSA6&t=1417

ask.ghamidi.org

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[Muhammad Bilal]

Assalāmu ‘Alaikum wa Rahmatullāhi wa Barakātuh,

I seek clarification regarding the ruling of Contract for Difference (CFD) trading.

In CFD trading, there is no actual buying or selling of any asset. It is only a contract based on price difference, where profit or loss is settled in cash according to the movement of the asset’s price. The trader does not own or receive the underlying asset at any point. There is only price difference. No asset buying takes place, its just the price difference we are getting after closing the trade.

Kindly advise whether such a transaction is considered a valid bai‘ (sale) in Shariah, or if it falls under gharar or maysirdue to its speculative nature.

JazakAllahu khayran for your guidance.

[Umer]

If there is no element of deceit or unfairness, then a transaction cannot be considered prohibited merely due to the absence of physical possession or ownership. The permissibility of such arrangements should primarily be determined by the parties directly involved or by qualified professionals in the field. Based on available information, Contracts for Difference (CFDs) are not inherently prohibited.

Speculation is distinct from gambling. Speculative trading is generally a short-term strategy that relies on technical and sentiment analysis, aiming to benefit from price fluctuations within a limited timeframe. In principle, all forms of trade are permissible (halal) except those that involve immorality or injustice. As long as such aspects are avoided, speculative trading is not objectionable.

Gambling, by contrast, is based purely on chance and typically involves two or more participants, where one party’s gain is directly tied to another party’s loss. In such cases, the winning party has no legitimate moral right to the money obtained, which makes gambling fundamentally different from speculative trading.