Understanding the Islamic Forex Account and its Structure

Technically forex trading is prohibited unless they use an Islamic forex account. It is because the regular trading account incurs interest which is haram or forbidden. Due to the Islamic belief, most Muslims refrain themselves from forex trading until swap free account or halal forex brokers were started. Nevertheless, Islamic forex brokers offer services to Muslim traders only. Find out our best swap free forex broker list created by our expert team.

Usually, Islamic forex trading involves all types of religious guidelines. However, all the brokers may not offer the same rules or conditions. Therefore, you must find out the best forex broker. But, before that, you should have a proper understanding of Islamic forex.

This article will enlighten you about Islamic forex trading and accounts. Without further ado, let's begin with the basics of Islamic accounts.

Understanding the Islamic Forex Account

It is usually known as a swap free account. In other words, it is a halal trading account that follows Islamic Shariah laws. You can know from the name that; this account is dissimilar from a regular trading account.

However, the Shariah law is very strict, which forbids any financial transaction involving interest or any kind of illegal stuff. However, forex trading doesn't have anything illegal in it, the interest. Therefore, as a Muslim, if you take benefits from interest, you will be a sinner. So, for the practicing Muslim, trading with a regular forex account is haram. However, it does not indicate that you cannot trade through the regular account.

So, keeping the Muslims in mind, many brokers looked for an alternative and came out with a solution that doesn't have any relation with interest. However, the alternative is not a recent invention. Few brokers used to offer swap free accounts. But, with the increasing involvement of the Muslims, almost all the brokers nowadays offer Islamic forex accounts.

Although the regular brokers offer the Islamic forex, they provide full support to use the Islamic account effectively. However, the brokers do not publicize the Islamic forex account as these accounts are less profitable. But any Muslim can ask for swap free account, and brokers can offer according to their requirements.

RANK	VISIT BROKER	REGULATION We only list licensed brokers that comply with the requirements of prominent regulatory agencies.	MIN DEPOSIT The minimum amount you need to deposit in order to start trading.	DEPOSIT BONUS	RATING	MAX LEVERAGE Leverage refers to the ratio of securities you can buy for a given payment. The higher the leverage ratio, the higher your buying power (and the higher the risk). For example, a leverage ratio of 500:1 means you can purchase 500 securities, but only pay the equivalent of 1 security valuation. The leverage ratio offered can vary depending on the experience level of the trader.	PAYMENT SYSTEM	SUPPORT	START TRADING
1		ASIC, CySEC, FSP	$100	No Bonus	99 Read Review	1:500		Telephone: +44 28 2544 7780	Open an Account More Information
Pros Excellent education tools Low forex fees Fast account opening Easy funding methods Cons No bonuses Platforms & Devices READ FULL REVIEW
2		FCA, CySEC, FSCA, SCB	$100	No Bonus	94 Read Review	1:100		Telephone: +44 (0) 203 151 5550	Open an Account More Information
Pros Excellent customer service Free deposit and withdrawal Negative balance protection Wide range of platform Cons Inactivity fee High Trading Fees for some CFDs Platforms & Devices READ FULL REVIEW
3		ASIC, CySEC, FSA, SCB	$200	No Bonus	92 Read Review	1:500		Telephone: +248 467 19 76	Open an Account More Information
Pros Low forex fees Fast order execution Analytical training materials 90+ instruments Cons Slow live chat support Non-EU traders don’t get investor protection Platforms & Devices READ FULL REVIEW
4		ASIC, CySEC	$1	100%	91 Read Review	1:3000		Telephone: +35 7251 23212	Open an Account More Information
Pros No withdrawal fee Low stock and stock index CFD fees Negative balance protection No inactivity fee Cons Average forex CFD fees No PAMM accounts Platforms & Devices READ FULL REVIEW
5		ASIC, CySEC, FSC	$5	Up to $5000	90 Read Review	1:1000		Telephone: +501 223-6696	Open an Account More Information
Pros Low withdrawal fees Great educational tools Wide range of leverage Multilingual customer support Cons Non-EU traders don’t get investor protection Lack of weekend customer support Platforms & Devices READ FULL REVIEW
6		FSA	$0	No Bonus	90 Read Review	1:500		Telephone:	Open an Account More Information
Pros 9 base currencies 24/7 technical service Direct market access VPS, FIX API, copy trading Superior trading conditions Cons No negative balance protection Withdrawal fees Platforms & Devices READ FULL REVIEW
7		FCA, DFSA, FSCA, FSA, CMA	$5	100%	88 Read Review	1:1000		Telephone: +44-2030978571	Open an Account More Information
Pros Low spread Controlled by several regulators Numerous deposit and withdrawal Favorable trading conditions Cons Few account currencies Only USD or EUR as base currencies Platforms & Devices READ FULL REVIEW
8		ASIC, FCA	$0	No Bonus	85 Read Review	1:500		Telephone: +61 2 9965 5830	Open an Account More Information
Pros Automatic insurance coverage Low entry threshold Fully digital account opening Low forex fees Cons Limited research tools Only forex and CFD trading Platforms & Devices READ FULL REVIEW
9		CFTC, FCA, ASIC, FSA, MFSA	$0	up to $1000	78 Read Review	1:50		Telephone: 1 212 858 7690	Open an Account More Information
Pros Outstanding research tools Excellent trading platforms Accepts U.S. clients Superior research offerings Cons No account protection for U.S. clients Monthly inactivity fee Platforms & Devices READ FULL REVIEW
10		FCA, ASIC, DFSA	$200	No Bonus	75 Read Review	1:30		Telephone: +1786 628 1209	Open an Account More Information
Pros Digital account opening process Seamless deposit and withdrawal Attractive trading conditions No inactivity fee Cons No cent account Few analytical materials Platforms & Devices READ FULL REVIEW

Islamic Financial Law Basics

Islamic laws may seem complicated if you don't understand them properly. Therefore, you may not be able to find the right Islamic forex account without knowing the laws. We have compiled all the relevant Islamic financial laws.

Riba

The Arabic term Riba means interest that has been charged on a transaction. Further, lending money for interest is also known as Riba. In simple words, Riba means making money from money, and this is prohibited in Islam. Therefore, paying interest or earning money through interest is haram.

Gahar

It represents the risk. Precisely selling an item or stuff that is not available physically is forbidden. So, the practicing Muslim cannot participate in any sort of gambling as well as a short position in trading. Hence, the trader should take a long position, which should be an overnight position. Apart from this, any agreement for future trading is also not allowed in Islam.

The Mudharabah Arrangement

It is basically a partnership between two parties, such as the investors and the fund manager. However, the Mudharabah agreement usually happens unrestricted and restricted. In the case of a restricted agreement, the fund's manager or administrator owns the authority to manage the fund. But there is no such thing available for the unrestricted find.

Musharakah Arrangement

It is an allowed partnership model from the shariah law. Musharakah basically means 'to share.' It is a kind of agreement on which two parties will certainly get the benefits. It is the perfect way to allocate the earning without breaking the Riba rule.

Moreover, the partners don't just sign for the profits; they will also share the loss too. However, it depends on the fund invested by a trader or the investor. Overall, the profit or loss is shared as per the previous agreement.

Prohibitions by Islam

There are many prohibitions in Islam regarding the financial transaction, and traders are not allowed to do any of these. But, swap free broker can work with the prohibitions on Islamic forex trading.

Islamic Prohibitions

• Margin deposit's interest: It signifies the incurred interest that comes out from the deposit. However, the margin deposit's interest is bidden by sharia law.
• Overnight rollovers: As per the Shariah rule, a Muslim trader cannot work with a forex account that charges or receive points from holding a position overnight. Normally any position that stays open after 5 PM is known as overnight rollover.
• Loans: A Muslim trader cannot take loans that have an interest in it as this kind of activity breaks the Riba rule. Further, a signed agreement with replaying assurance is also prohibited.
• Short Sales: Islamic law also forbids short sales. Therefore, no one can borrow an asset for a short span of time and then sell it to earn some quick profit. But, short sales are not applicable for forex trading. It mainly works with stock trading.
• Forward sales: It is such an agreement that involves buying or selling something at a future date whose price is agreed today. Sharia law doesn't allow this. But, trading with a swap free forex broker will definitely help the trader to avoid this.
• Margin Trading: Trading on a margin trading signifies the borrowing money in terms of interest from the broker. However, this is banned by the shariah for the Muslims. Therefore, a swap free account will come in handy.

Commissions in Islamic Trading Account

Usually, regular forex reading platforms' earning sources are fees and commission. Since Islamic forex brokers do not charge interest, how do they earn money? So, it might be a mystery how does halal forex brokers get their fees!

The answer is they charge a commission, which is their source to earn money. Islamic forex brokers charge administrative fees as well as certain commissions on different trading. And these kinds of commissions and fees are different from the interest rate. Nevertheless, different brokers may charge differently, and you may check different forex broker reviews on the site to know the best Islamic forex broker and their commission rates.

Choosing the Best Islamic Forex Broker

As the demand increases, many forex brokers started offering swap free account. Therefore, many lucrative offerings confuse traders about the best Islamic forex broker. However, if you can stick to some requirements, you can easily find the best broker.

In the beginning, check out the regulation and regulatory status of your intended broker to ensure your funds are safe and secure with that broker.

Some swap free broker restrictions on swap time, while some brokers may offer unlimited time. For instance, Islamic forex account may offer different timing for holding a position. But, most of the time, they allow keeping a position for more than 30 days. This is actually more time for the long term position holder. Therefore, choose a broker as per your requirement and strategy.

Further, understanding the terms and conditions is also necessary. So, you will need to find a broker depending on their spread, leverage, minimum deposit, and more.

Normally, swap free broker offer Islamic forex trading, and this kind of account gets the same benefits as the regular forex account. So, you will need to know the regular forex broker's offering and then compare it with the Islamic forex account to see the compliance.

Moreover, you also need to check the pairs, asset classes, customer support, trading platforms, languages, and more. But, if you are a newbie trader, you can check out the top 100 forex brokers and easily find the desired one.

Opening Process of an Islamic Trading Account

Once you select a swap free forex broker, you can go for the account opening process. However, the process is similar to the regular forex broker. You will need to supply some personal info and documents to the broker to get your account approved.

Assets you can Trade via Islamic Account

Islamic accounts don't put any restrictions on trading. Therefore, a trader can trade anything that doesn't go against religious or shariah beliefs. For instance, you should not trade shares of a company that is related to alcohol or other haram stuff.

Benefits of Trading with Islamic Forex Account

• As a Muslim, your belief will not get hurt.
• Anyone can take a long term position without any interest fees and charges.
• Mudarabah type accounts are beneficial for both parties.

Conclusion

An Islamic forex account is the best option for Muslim traders. But Muslim traders don't need to trade through an Islamic account or the swap free account. Muslims can trade via regular accounts too. But trading with Islamic accounts keeps no doubt about haram trading. So, try to find the best forex broker that offers Islamic trading.