Forex And Islam

Forex And Islam

Forex And Islam

The potential for Islamic Forex has become possible due to Islamic Forex brokers and brokers that offer the possibilities for Islamic Forex trading. First of all, the method of trading has nothing to do with religion, although the name of it certainly implies it. You don't have to be a follower of Islam to trade the market, and no one checks your religious affiliation.

According to Islamic law, you can't pay or take interest for services rendered. So, for Forex traders this directly affects any trading that happens overnight because of interest rates assigned to swap trades. Because of the traders that would be interested in trading Forex otherwise, there became brokers available to compensate these situations.

There wasn't a situation that the broker had to give up business, but in order for them to become Islamic Forex brokers, he knew that he had to pay the inevitable interest. Someone had to, and the respective agencies involved weren't willing to forego the charges. What happened was rather logical. If the broker was willing to pay the interest, then he adjusted the pair spread to increase his income. It became all part of Islamic Forex.

If a trader is only going to day trade or scalp then he has no need for Islamic Forex or Islamic Forex brokers. On day trades and scalping, there is no interest involved so the topic is a non-starter. The Forex trader does not take a position overnight and there are no interest charges on trades made during a Forex trading session.

The primary guiding principle of Islamic Forex is the ban on the payment of interest, or riba (usury). This system of finance follows Islamic rules on transactions, or fiqh muamalat, which assert that money be earned not from interest, but from commodities and services. So, the Islamic Forex brokers accommodate and make his money in other ways. The spreads might be a bit different, but it allows worldwide trading which became all-inclusive. Everybody wins.

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