Best Islamic Forex Accounts

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Contributor, Benzinga
July 27, 2021

Want to jump straight to the answer? The best forex broker for most people is definitely FOREX.com or CedarFX.

If you practice the Islamic faith and observe Sharia law using a regular forex trading account, interest charged or paid on regular forex accounts might be against your beliefs. There are other aspects of forex trading that could offend your sensibilities if the broker does not provide you with the appropriate type of account.

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 you open an Islamic account.

Best Islamic Forex Accounts:

What’s an Islamic Forex Account?

An Islamic, or ḥalāl forex trading account, differs considerably from a regular forex trading account. Most importantly, Sharia law prohibits the accrual of interest on funds deposited in the account and precludes 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. If you are referencing Islamic guidance on the matter, the trade should occur as if it were “hand to hand.”

Two of the key elements of Islamic law that relate to trading accounts are listed below.

Riba

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.

Gharar

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.

Islamic Prohibitions

  • 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 5 or 14 business days on most 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. 

Forex.com
Best For
  • Forex Investing
securely through Forex.com's website

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 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.

Read Benzinga's full FOREX.com review.

AvaTrade
Best For
  • Non US Forex Trading
securely through AvaTrade's website

Best for Support: AvaTrade

AvaTrade's 24-hour multilingual support desks: One of the best reason to choose AvaTrade. In addition to superior customer support, AvaTrade offers a full spectrum of trading instruments, including forex, stocks, commodities, crypto and indices. AvaTrade fits you whether you're an experienced trader or novice.

AvaTrade's popular WebTrader, AvaTradeGO, MetaTrader 4, MetaTrader 5 and AvaOptions and more cover a slew of automated trading options that create a powerful, flexible trading environment.

AvaTrade's Islamic trading account options avoid keeping a position overnight in order to pay a rollover fee. Here's how to open an Islamic account:

  1. Verify your account by sending relevant documentation.
  2. Fund your current trading account.
  3. Apply for an Islamic account. It'll usually take 1-2 business days for your account to process.

Register with AvaTrade today.

Pepperstone
Best For
  • Customer Service
securely through Pepperstone's website

Best for Customer Satisfaction: Pepperstone

Pepperstone tops the industry for customer satisfaction. Whether you're trying to navigate platform features, depend on reliable platform features or ask a question, Pepperstone delivers. An ASIC and FCA regulated broker, Pepperstone also offers a feature-rich trading experience and customized trading experience on MetaTrader 4, MetaTrader 5, cTrader and social trading tools.

Customer satisfaction is high among those with Islamic accounts. Key features for this account include straight-through processing and 1.0-1.2 pip average spreads. The account doesn't pay or receive swaps for Muslim traders.

Swap-free accounts are available if you live in one of the following countries: Albania, Azerbaijan, Bangladesh, Burkina Faso, Bahrain, Brunei, Brunei Darussalam, Algeria, Egypt, Guinea, Indonesia, Jordan, Kyrgyzstan, Kuwait, Morocco, Mauritania, Maldives, Malaysia, Niger, Oman, Pakistan, Palestinian Territory, Qatar, Sierra Leona, Chad, Tajikistan, Turkmenistan, Tunisia, Turkey, Uzbekistan, and Kosovo.

Ready to trade with Pepperstone? Open a live account or try a demo account.

eToro Forex
Best For
  • Copy Traders
securely through eToro Forex's website

Best for Social Trading: eToro

You can trade hundreds of different financial assets on eToro. In compliance with Sharia law, eToro also offers:

  • No interest on a settlement for more than 24 hours and consistent zero rollover interest
  • No additional commission charged on rollover for more than 24 hours.
  • No charges, commissions or fees on account management. The only revenues come strictly from the spreads.

Here's how you can open an eToro Islamic account:

  • Register for an account and invest a minimum of $1,000.
  • Provide identification documents to complete account verification.

Get started with eToro today.

easyMarkets
Best For
  • Starting Forex Trading
securely through easyMarkets's website

easyMarkets

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 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.

Find the Best Islamic Forex Account for You

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.

Finally, if you need to improve your knowledge on forex trading, tap into some best educational resources on Benzinga.

Frequently Asked Questions

Q
Can you legally trade forex under Islamic law?
A

Forex trading is permissible under several conditions to include there is no interest, all trades are in person and don’t violate the tenants of Islam.

Q
Is online trading legal in Islam?
A

Online trading is permitted as long as you are not buying and selling assets that harm Islam.

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets plus spot metals with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.