The Ultimate Guide to
Islamic Trading Accounts
What is an Islamic trading account?
Also known as a “swap free” account, Islamic accounts have a number of differences from regular forex trading accounts. With Sharia Law forbidding the accrual of interest on funds deposited in an account, traders with Islamic Accounts do not incur or receive rollover swap points on positions open for longer than 24 hours, and they earn no interest on deposited funds. Also, Islamic Account trades must be made with no delay, so currencies must be transferred from one account to another immediately, with transaction costs also paid at the same time.
Who is an Islamic trading account for?
Regular forex trading accounts charge interest on certain trades, which can be a problem for some traders as making money from money, or Riba, is not permissible under Sharia law. Additionally, in Islam Gharar, or gambling, is also not permitted. Gharar can refer to the volatile conditions in the forex market which make it difficult to predict with certainty what is likely to happen, and can therefore be considered akin to gambling.
What types of trades are not allowed in Islamic accounts?
These common forex trends are not generally permitted within Islamic trading accounts:
- Riba – interest that is charged from the buyer under different conditions.
- Pledge – a signed commitment agreeing to pay back a loan within a limited time, with the agent permitted to sell out the contract and recover the loan if the customer is unable to reach the specific percentage of the margin.
- Loans – money given by an agent (bank) to the customer on some settled terms of interest.
- Short selling – borrowing and selling an asset the trader does not own for profit.
- Trading on margin – borrowing money from a broker to purchase stock.
- Forwards sales – an agreement to buy or sell an asset at a future time on a price agreed today.
How can I open an Islamic account?
Opening an Islamic forex account is now easier than ever. With the Islamic banking sector as growing by an average of 19.7% a year, there is now an increasing number of brokers offering Islamic forex account services. The accounts are designed in the support of all the Islamic rulings on business and investments.
