Forex In Islam: Haram or Halal?

Is it permissible and what kind of risks does it carry? Does it align with Islamic teachings?

Firstly, I would like to start with information about the sources I'm using and which will be the main focus of this article. I came across the two articles by Yagub Rahimov and certain YouTube videos by deciding decidingfordeciding for fofor IslamicrIslamic Finance professional Rakaan Kayali (all of them will be linked and mentioned below). Both of them have presented a little different outlook on the issue of halal forex trading. In the end, Allah knows best but with the presented evidence, consequences, and rational reasoning we will be able to make a decision of ourselves.

Producing copyright content regarding such issues I believe requires years of research studying and gathering knowledge. I see no harm in redirecting to legit sources and more knowledgeable individuals than myself. I will gist through important concepts and terms which we should take into consideration while discussing the problem. Putting the sources side by side will show the great contrast and highlight the issue which is usually omitted during discussing the 'halanes' of forex trading. This isn't really an article but the comparison and notes taken while researching, In Shaa Allah you may find it beneficial.

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Many would argue that as long as forex trading is treated as a job, not as a gamble it is permissible. Not making guesses and trading by really analyzing, calculating, and observing the market. Same as brother claimed Yagub Rahimov and the opinion of scholars he looked at while writing his article.

''Forex is Halal if you are not gambling and have your end goals distinguished.''

Honestly, it doesn't end there. It's way more complex. It's an ongoing issue debated by the scholar, some even forbid it completely! Logically even if we have a good intention but we engage in haram, it will never result in halal. So how is it haram? Does even the Islamic forex trading account is considered haram? Well, some say yes some say no. I will pounder upon the most rational explanation I came across. And to my judgment and understanding, it isn't permitted. Here is why.

In a video https://www.youtube.com/watch?v=Itnhu-Ja1t0&t=775s on Practical Islamic Finance channel brother Rakaan Kayali talked about the following issues:

- Are Islamic Forex accounts really halal? Answer: No they aren't.

- Is speculating on currency price halal?

- Forex trading: is it Halal? Answer: No it isn't.

- What are the conditions for Halal currency speculation?

- Do Forex accounts, even the Islamic ones, meet the conditions for Halal currency speculation? Answer: No they don't. (even if they are interest-free)

Condition for Halal Forex trading:

1. Having perfect ownership of currency (You can use it whatever you want, the possibility to withdraw it. No requirements on what money should be spent on, which in Forex is nonexistent. You can only use your funds to trade, you don't possess the currency physically, it exists virtually, and can't be exchanged to cash out as a physical entity. Again, it has the purpose only to trade on the forex platform.) Now ask yourself, is it really deciding true? Do you see perfect ownership here?

2. No Margin (in general no fees at all, not for a limited period. If there's no margin then probably as all forex trading accounts have certain conditions which mean means that you use your money on certain platforms under the condition to trade and that does not align with the teachings of Islam. If they wouldn't profit from the transactions you do on their platform they also wouldn't run this business if it wasn't profitable ) Why? Because that falls into the Riba category. Also events with no SWAP fees etc. there will be placed conditions on how you can spend your money, = Margin with the condition to trade on their platform is haram. To sum up, to make it permissible there needs to be No leverage, no loans provided by the trading platform. Once you use borrowed money/loaned money from the platform which is enabling you to trade also once you borrow money it is on the condition to be listed for trade (AND IT ALWAYS IS) That's the violation of the condition on not using a margin.

On no currencies platform, these two conditions are met.

To understand fully the issues I gisted through, check out the video where everything is explained in great detail.

Interest fees are haram in Islam, therefore having a normal Forex account would be Haram for anybody. On the contrary, an Islamic Forex account is similar to a regular Forex trading account, but, it has no interest fees or SWAP.

What is a Swap-free account?

Swap stands for the simultaneous purchase and sale of identical amounts of one currency against another, with two different value dates. You can also say that Swap stands for overnight interest. In simpler terms, a Swap-free account has no interest fees.

The author Yagub Rahimov of the article at https://atozmarkets.com/news/forex-is-halal-or-haram/?fbclid=IwAR25wfGavG3YjFP2yVfWs7_2xnTRCzLiUHqEpyTGAXBTfSS70XB8Kk7HKks

I would say omitted the aspect of perfect ownership of currency, (even though whatever he wrote it might be his personal opinion). Focusing only on the aspect of SWAP free accounts. So basically to his reasoning that was the only two reasons which he took into account while discussing halaness of forex:

https://atozmarkets.com/news/how-to-choose-an-islamic-forex-account/?fbclid=IwAR3WGBazkuH9aMpOeASQDzj1Pm5GrAM_k3Rbv2JRy5KEWFkabhFu80IqLnc

1. Thin line with gambling depending on us how we treat the forex so, the right intention not treating it as gambling = halal

2. No SWAP fees = it's halal

Additionally, he (Yagub Rahimov) included the opinion of a scholar who permitted the forex trading activities on Islamic forex accounts (with no SWAP fees) but again I emphasize what the brother Rakaan said: NO FOREX PLATFORM MEETS THE TWO CONDITIONS FOR (FULLY) HALAL TRANSACTIONS.

Again I emphasize that this is an ongoing issue and scholars are debating over it. There those are who agree and permit it and those who forbid it completely. I'm not a scholar but I am entitled to opinion and Allah may judge me for that as well as all people who decide to engage in forex and the ones who decide to stay away from it. I presented the sources which included the most logical explanation for me. I encourage you to do more research if you are seriously considering taking part in forex trading. Also please do not mistake forex trading with investing in stocks, these are completely different matters.

From the author: Jazakallah Khayran for your attention! With the help of Allah may we all achieve greatness in worldly affairs and i the hereafter. Walaykum Salam!