How to Open a Forex Islamic Account The swap-free option can be chosen as part of the trading account registration in 3 easy steps: As mentioned earlier, there is a sizeable market among the Muslim populace for forex brokers to tap into. When it comes to religious differences among traders the focal point is Muslim traders who are restricted from earning on interest. Conclusion Now that we understand that an Islamic or Swap free trading account is a trading account allowed by the Islamic Shariah principle where there is no interest applied for an overnight position, Islamic traders can benefit from online trading. Some of the cookies are needed to provide essential features, such as login sessions, and cannot be disabled.
A forex swap is a commission or rollover interest charged by a broker for extending a trader’s position overnight. This is the reason why most traders refuse to prolong a deal until the next day. This is the reason why most traders refuse to prolong a deal until the next day.
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Video Interview Forex TV: For each currency, there is a prevailing market interest rate which can differ between the two currencies of the traded pair.
If a forex trader enters into a market position and holds the position in the currency which has a higher interest rate than the other currency in the pair, there will an interest differential between the two currencies. This happens at the end of every trading day when the position is rolled over to the next trading day. Well, the solution to this dilemma is to trade the forex market with a swap free trading account.
So how does a swap free trading account work? Normally for overnight positions, the forex broker will retain a portion of the interest swap as handling charges.
Alternatively, the broker may just widen the spreads more on such trades. In this manner, the trader will not be charged any interest or get to earn any interest on his trade. Since no swaps were involved, this type of trading accounts is called a swap free account. There is a consensus that forex trading with swap free accounts is halal due to the fact that there is no interest applied, and commerce and trading has always been an activity that has been encouraged by Islam.
These laws cover all aspects of how a Muslim should live and governs how a Muslim should conduct himself in society and in commerce. In Islam, a Muslim has always been encouraged to be selfless and be generous and make sacrifices to those who are less fortunate than them in life. For example, if a person in need was to approach a Muslim for loan, the Muslim is obliged to provide the loan without charging any interest on the loan. As you can see, the Islamic way of life is completely different to the modern way of life where personal benefits and self interest reign.
The differences also extend to the modern banking system and the Islamic banking system. In Islamic banking, there is interest involved and banking transactions are conducted using 2 types of arrangements known as Mudharabah and Musharakah. Essentially, both the depositor investor and a bank enters into a profit sharing arrangement where the profit from the transaction is shared based on a mutually agreed formula.
As this form of arrangement is regarded as a partnership, the investor is also liable for a portion of the losses should the investment transaction fail. In short, the Mudharabah banking arrangement permits Muslims to loan out their money for a share of the profits in a similar fashion to where conventional banks pays out interest to depositors.
So what a Mudharabah banking arrangement does is to extend the concept of an ordinary business partnership to cover the relationship between the depositor and the bank. With the Musharakah arrangement, the bank enters into a business relationship with an individual who is regarded as the investor.
Under this arrangement, profits are divided based on the capital contribution. The Musharakah arrangement is normally used when an individual wishes to take a mortgage for the purchase of a property.
For mortgages under the Musharakah arrangement, the property is actually purchased by the bank in return for a share of the rent that the property would earn from the occupier of the property. The Musharakah arrangement works just like a normal mortgage arrangement where all the terms and conditions between the parties are clearly defined. Once the buyer has fully paid up his loan, the arrangement between the buyer and the bank will end. As retail forex becomes more popular over the years, it has triggered a debate among Islamic scholars as to whether it is permissible for Muslims to participate in it.
The availability of swap free trading accounts means that Muslim traders can still participate in forex trading while fulfilling their religious obligations at the same time. As mentioned earlier, there is a sizeable market among the Muslim populace for forex brokers to tap into.
About Forex Islamic Accounts
rows · Below is the list of Forex brokers who offer Islamic or swap-free accounts with no rollover . Forex brokers with swap-free accounts. CM Trading CM trading was founded in in South Africa. The company provides a genuine trading experience and many unique features that make trading with them an easy and effortless experience. Forex Islamic accounts are also known as swap-free accounts as they imply no swap or rollover interest on overnight positions, which is against Islamic faith. We .