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Thread: Forex Trading In Islam (Permissible or Not)

  1. #1
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    Forex Trading In Islam (Permissible or Not)

    Hello Friends,

    I don't know if it is the right section, because the section's name is Trading from A to Z, so I am pretty sure that my thread comes in the same category. The purpose of opening that thread is: Knowledge to inform you and getting yours information in my knowledge, so I may know what you have and you may know what I am saying.

    Well, in past years when people were very concerned about FX, they went to some of the online scholars asking that whether is it okay to go ahead with marginal FX trading or not, and most of the time, there used to be an answer that No, marginal trading is not permissible. At that time, there were no swap-free accounts but now, large number of brokers offer this swap-free account including RoboForex.

    We must realize that there are many grey areas which most people (even scholars) are unable to understand. No wonders that some scholars, who are well in finance world suggests to go with it.

    Let me give you the example of Dr Zakir Naik. Dr Zakir naik is a stocks trader, and i watched his video on the internet regarding stocks and he mentioned there that: "Margin trading is halal as long as no interest is charged"

    What is annoying me is the fact about leverage in Forex which is not mentioned anywhere in the internet.

    Difference between the marginal trading (leverage) in stocks and marginal trading (leverage) in Forex:

    I hope that you are aware that, in stocks trading, you will not be able to get enough leverage from your brokers or even banks. Why? Did you ever thought about this matter? Use your brain to think about it. Its because in stocks, they are lending you REAL money instead of just contracts, so that you could buy and sell your shares, and the main point is to control the debt.

    Don't you wonder that in these days, there are brokers providing high leverage? (No problems with that), but what is the difference? If the leverages like 1:1000 can be given for currencies trading then why it cannot be given in stocks trading? where the risk is less than the risk in Forex!

    The truth is, margin trading in Forex doesn't means that someone is lending you, it seems essential that it is trading on discounts that government orders the banks to charge no more than 2% in USA for their orders, that's 1:50 leverage. So, the currencies belongs to the country and country belongs to its governor, then to whom the currency belongs indirectly? the currencies belongs to the government. So, if the owner is saying that, do not charge more than more or less than 2% for their orders (most likely, less than 2% for their orders) then what it is? A discount? or lending?

    Let me ask you a simple question. Do you think that brokerage firms are that much rich to lend you billions of dollars on every trade you make? Lets say that if the broker have a order of 1000 standard lots (1000 customers, 1 lot from each) at a time, it means that all customers have 1,000 USD and having the leverage of 1:100, then do you imagine what would be the amount of so called lending procedure? It turns to 100 Million Dollars, How the hell 100 Million Dollars could even be printed in just a day. Even banks lack such kind of funds for immediate delivery, brokers are far from that.

    I have done enough research on leverage, and with my understanding, I am at the conclusion that leverage in FX doesn't means lending, it means, discount trading in terms of Forex. Think about the customers, most of the brokers have 100,000 of customers and they order the minimum of 0.5 lots at some time which means 50,000 standard lots (just for an example), then where the amount will go? Will not it turn into billions?

    I think, what they do with the FX trading is, they just note that for example "A trader purchased 100 lots at such price, TP and SL". Its just a matter of electronic paper works. Its their system where orders take place (of-course in a bank's system). I don't mean to say that trades are not executed, trades are executed but its a rule of financial market that you can pay 1% now and remaining 99% after the delivery which in the matter of Forex, delivery of spot FX takes place in 2 days.

    Why you extend your positions by giving swap? That means, you want to keep using the discounts and do not have other 99% to pay, so you are delaying the transactions by giving interest (which is obvious Riba).

    Well, the main question remains same. If the FX trading is permissible or not. And, do you think that leverage is a discount or you still think that its lending/borrowing of funds. If you think that its lending/borrowing, please write why, and if you think I am right, then also write why!

    We're looking for the peace in both worlds. It is unfair that we dis-respect the orders from our God and just care about this temporary world? How much time we can live in this earth? for 100 years at most? Okay, 120 years at most. The avg is 60 years. Do you want the paradise for eternity OR paradise in this world for averagely 60 years and then hell-fire for eternity. The reason I am saying is that, I want you to think seriously and answer the question because it is the matter of Riba. Even I am not yet confirmed if dealing in Forex is okay or not. So, I thought that asking from you here will be a good idea.

    The main question remains same. It is just the information I thought to give you about leverage because it is the first reason your scholar will give you to say that it is impermissible. Information is given so that you could think enough about whether it is okay to go ahead or we should leave this profession.

    Again, the major reasons which scholars give when they say that it is impermissible:

    - Possession of currencies (We get ownership rights but only some scholars understand electronic rights)
    - Use of margin. (Scholars say that it must be 1:1, but even if that is the case, then what about long/short issue which gonna remain same even with 1:1, short (sell) means, we are borrowing one and purchasing other, in Forex, we don't borrow actually but if scholars insist on it, then tell them that even with full payment, the matter of borrowing will remain same. Without borrowing, no chance of business.) Remember that I don't think borrowing of funds exists. Specially when it is interest-free? Sigh. impossible.
    - Hand to hand. (It is an advanced world now and electronic systems are now our hands)

    I hope that you aren't bored with those details, also, I bear no responsibility if my thoughts are 100% correct (because after all, they are just thoughts)


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  2. #271
    Trader Yayami's Avatar
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    Quote Originally Posted by naeem555 View Post
    Yayami, luck is simple and if we work on luck we do gambling but at same time we cannot ignore luck also, sometime we can earn by luck and some time we can lose by luck, so make sure you accept luck but not depend on luck when you depend on luck you can do gambling and can lose big, so make sure you trade properly with some plans without analysis do not enter into market
    that's the reason why people out there are keep thinking about forex is prohibited since their mindset find it equals between forex trading and gamble. only a smart, experienced, and well educated person who will only think that forex trading is allowed to do as long as there's no interests or swap involved in trading. and one more thing, each trading decisions must be made through deep analysis with no speculation. i'm fully aware of this as a Muslim trader and do my best not to depend on luck, don't get the swap, and always use my analysis to trade.

    Not allowed!

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