If you practice the Islamic faith and observe Sharīʿah (also spelled Sharia) law using a regular forex trading account, interest charged or paid on regular forex accounts might be against your beliefs due.
For this reason, a number of forex brokers offer clients an Islamic option when you open an account. Keep in mind, however, that not all forex brokers are created equal, and the terms of Islamic accounts also differ considerably. Carefully consider your religious guidelines, your needs as a trader and a broker’s features before opening an Islamic account.
Quick Look: The Best Islamic Forex Accounts
- Best Overall: FOREX.com – Open an Account
What’s an Islamic Forex Account?
An Islamic or ḥalāl forex trading account differs considerably from a regular forex trading account in certain ways. Most importantly, Sharia law prohibits the accrual of interest on funds deposited in the account and exclude these accounts from incurring or receiving rollover swap points on positions that remain open at the New York close of 5 p.m. EST.
Another important feature of an Islamic account is that transactions must be settled immediately. This means that currencies must be transferred between accounts right after the transaction and the cost of the transaction is paid at the same time.
Two of the key elements of Islamic law that relate to trading accounts are listed below.
The Islamic prohibition of making money from money, or “Riba,” which specifically includes interest, is not permitted by Sharia law. Riba can also be translated as “usury,” and it consists of what those of the Islamic faith consider unjust and exploitative gains made in the course of trade or business.
The practice of Gharar can be roughly translated as gambling and is prohibited. That Arabic word also suggests an element of deception and can refer to a hazardous sale or risky investment. A very conservative case might be made that speculating on the forex market by trading currency pairs or CFDs is gambling.
Nevertheless, long term and sound investments made in the capital markets, including the bond market and the stock market, would generally not be considered gambling.
These Islamic prohibitions can affect these financial activities
- Overnight rollovers: Sharia law prohibits trading accounts from incurring or receiving rollover swap points on positions that remain open at the New York close of 5 p.m. EST.
- Interest on margin deposits: Sharia law prohibits the accrual of interest on the funds deposited in a trading account.
- Loans: Money transferred by a bank or financial institution as a loan to a customer with interest terms is prohibited because it involves Riba. Signed commitments and pledges to repay loans also fall into this prohibited category.
- Margin trading: Trading stocks on margin involve paying interest (that would amount to Riba) for borrowing money from a broker to buy or sell equities, so that would also be against Sharia law. In contrast, trading forex just requires a margin deposit with no interest charged when you make a transaction on margin.
- Short sales: Engaging in a short sale by borrowing and subsequently selling an asset for profit is forbidden. This is mostly an issue with stock trades, not forex trades.
- Forward sales: Sharia prohibits agreements to buy or sell at a future date on a price agreed upon today. This would prevent you from entering into forward contracts or trading futures contracts.
What to Look for in an Islamic Forex Account
Your broker candidates should have oversight from a reputable forex regulator, such as the U.K.’s Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC), the U.S. Commodities Futures Trading Commission (CFTC), the National Futures Association (NFA) or the Australian Securities Investment Commission (ASIC).
Many brokers that offer customers swap-free Islamic accounts place time restrictions on the no-swap period. Very few brokers will allow you unlimited swap-free periods. For example, the swap-free account will be authorized for five or 14 business days in many accounts. Also, forex brokers often ask potential clients seeking Islamic accounts to demonstrate why they need this type of account and ask for proof of their religious affiliation.
Make sure you check with each broker about the specific terms and conditions of the Islamic account, since considerable differences can exist. Also, ask about a broker’s swap-free time frame and whether Islamic accounts require a higher deposit. Remember to ask how wide dealing spreads are in the Islamic account and the kind of maximum leverage ratio you can expect.
Other considerations for an Islamic account involve the same type of elements you would look for in a regular forex account, such as trading platform, the currency pairs and other asset types you can trade, customer support, website and trading platform in your preferred language and educational resources.
If you have limited experience trading in the forex market, look into the best forex broker for beginners that also offers an Islamic account.
The Best Forex Brokers with Islamic Accounts
Finding the best forex broker depends largely on your needs as a trader. If you have experience trading in the forex market, then you probably have an idea of what to look for in a broker, although if you’re starting from square one, then a broker with educational resources and an easy-to-navigate trading platform would be your best choice.
You can find a list of forex brokers that offer Islamic accounts below.
Spreads start as low as 1 But vary based on trading volume
- Traders of all skill levels
- If you need a great mobile experience
- Those who like easy-to-consume data and research
Best Overall: FOREX.com
While not apparent on its website, FOREX.com offers an Islamic account type. In its customer agreement addendum for an interest-free account (its version of an Islamic account), the broker “reserves the right to apply processing fees to interest-free accounts as assessed on a daily basis predicated on a review of open positions held overnight in the customer’s account.”
That could mean you will not be charged or receive interest on rollovers but could be charged a processing fee for the broker that performs the rollover.
FOREX.com offers over 80 forex currency pairs with competitive variable dealer spreads. The broker is based in the United States and has oversight by the U.S. CFTC and NFA and is registered and regulated in seven other major jurisdictions. FOREX.com asks for an initial deposit of $250 and offers low maximum leverage of just 50:1 due to U.S. regulations and 30:1 on European accounts.
Clients use MetaQuote’s MetaTrader 4 trading platform, including MT4 Web and MT4 Mobile platforms, as well as MetaTrader Apps and MT4 VPS hosting. In addition to the MT4 suite, FOREX.com offers clients its proprietary Advanced Trading Platform for desktop that also has a mobile app and a web-based version.
Headquartered in St. Vincent and The Grenadines, HotForex offers an Islamic option for its Micro, Premium, Zero Spread, Fixed and VIP accounts.
The Islamic HotForex account type does not incur swap or rollover charges on overnight positions but be aware that HotForex reserves the right to apply a carry charge on some currency pairs held overnight for more than seven days. You can obtain more information from a HotForex representative.
HotForex provides more than 100 tradable instruments including forex currency pairs, contracts for difference (CFDs) on cryptocurrencies, stocks, indices, bonds and commodities. The broker has oversight by regulatory agencies in the U.K. (FCA), South Africa (FSCA), Cyprus (CySEC), Germany (BaFin) and France (ACPR).
HotForex offers competitive fixed and variable dealing spreads, with a variable spread as low as 0.2 pips on EUR/USD. You can open a micro account with as little as $50 with a maximum leverage ratio for forex positions of 500:1. Another big plus from this broker is its negative balance protection.
HotForex supports the MetaTrader 4 trading platform and MT4 apps for Android, iOS and Windows mobile devices. Also, HotForex offers the MYFX trade manager free of charge for deposits over $2,000. HotForex is available to traders from all countries with the exception of the U.S., Canada, Sudan, Syria and North Korea.
Orbex offers an Islamic account with an unusual feature. Unlike most forex brokers that limit the time you can hold forex positions in an Islamic account, Orbex’s Islamic account allows you to hold forex positions for an unlimited amount of time.
Orbex traders can access over 35 currency pairs, gold and silver, oil futures and CFDs on stock indexes. The broker has oversight from the FCA, CySEC and BaFin. Another advantage of opening an Islamic account with this broker is that it offers a free virtual private server (VPS) to clients and provides automated and copy trading via FxStat TradeBook.
Orbex’s fixed and variable dealing spreads are competitive with other brokers, with a fixed spread of 1.8 pips on EUR/USD. The minimum deposit for an Orbex account is nevertheless on the high side, at $500, with a maximum leverage ratio of 500:1.
The broker supports the MT4 trading platform and features MetaQuotes’ MultiTerminal, which was designed specifically for professional traders and money managers, and it allows trading on multiple accounts. Orbex does not accept clients from the United States.
This international multi-asset broker offers an Islamic account and is headquartered in London and Melbourne. The Islamic account offered at ThinkMarkets also has unlimited time for holding forex positions, but if there are any discrepancies or manipulation in the account, ThinkMarkets can elect to convert the swap-free account back to a regular account.
ThinkMarkets gives its traders access to a number of different markets and tradable assets, including forex, CFDs on metals, commodities, cryptocurrencies, indices and stocks. The broker is authorized and regulated by the FCA and the ASIC. ThinkMarkets offers clients a free VPS service in addition to extensive educational resources for novice and inexperienced traders.
The broker supports the MT4 trading platform for Windows and Mac, including its mobile and web-based forms. In addition to the MT4 suite, ThinkMarkets offers an impressive proprietary platform called Trade Interceptor, which you can use on a mobile app and tablet and on your desktop.
Other trading tools available at ThinkMarkets are AutoChartist, FX Wire Pro and MT4 Super. The minimum deposit to open an account at ThinkMarkets is $250, and the maximum leverage ratio is 500:1. ThinkMarkets does not take retail U.S. clients, but it does accept U.S.-based eligible contract participants as defined by the Commodity Exchange Act.
Headquartered in the Marshall Islands, easyMarkets offers an Islamic account with a two-week limit on positions held overnight without incurring swap/interest charges. The easyMarkets Islamic accounts are fully Sharia compliant and share the same advantages as their other account types.
In addition to forex, easyMarkets gives clients access to options and more than 200 CFD markets that include currencies, precious metals, commodities and indices. The broker is regulated by CySEC in the EU and by ASIC in Australia. Also, easyMarkets has an extensive educational section on its website that features free e-books, a trading glossary and a useful knowledge base for new traders.
The broker requires a low minimum deposit amount of $25 and offers a maximum leverage ratio of 400:1.
The broker supports the MT4 trading platform and its mobile application, as well as its own proprietary easyMarkets trading platform. Other trading tools offered by easyMarkets consist of its own easyTrade tool that lets you ride your winners to maximum profit, a deal cancellation feature that lets you cancel a losing trade for a small fee and a Freeze Rate tool that lets you freeze the rate of a currency pair and gives you a few seconds to perform your trade.
Trading in an Islamic account may have some drawbacks but virtually all eliminate rollover swaps on overnight positions, at least for a limited time. Holding forex trades overnight can be a risky way to trade unless you place protective stop-loss orders or have deep pockets.
Also, day trading strategies that close out positions by 5 p.m. EST do not require rollovers, so using them in a regular account should not involve Riba, but if you’re a long-term trend trader with deep pockets who intends to run overnight positions on a regular basis, then use a broker with unlimited time to hold positions such as Orbex and ThinkMarkets.
Finally, if you need to improve your knowledge on forex trading, easyMarkets and ThinkMarkets have some of the best educational resources among the brokers reviewed here.