Best Islamic Forex Accounts

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Contributor, Benzinga
May 19, 2023

Check out FOREX.com for your Islamic forex broker needs!

Suppose you follow the Islamic religion and its Sharia law. In that case, a regular forex trading account probably would not satisfy your requirements because it charges interest. Some forex brokers offer a special type of account called an Islamic account designed to follow religious guidelines. 

Here, we review the top seven Islamic forex accounts and what to look out for in an Islamic forex account.  

Quick Look: Best Islamic Forex Accounts

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Best Islamic Forex Brokers

Here are the best seven Islamic forex brokers worth considering. 

1. Best Overall: FOREX.com

  • Forex.com
    Best For:
    Forex Trading in and Outside the U.S.
    securely through Forex.com's website

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

    The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account

FOREX.com offers an Islamic account type although it is not prominently advertised on the website. This forex account, known as an interest-free account, allows for rollovers without incurring interest charges. However, FOREX.com does reserve the right to apply processing fees to these accounts based on a review of overnight positions. 

The broker offers a wide range of forex currency pairs and uses the popular MetaTrader 4 platform, as well as a proprietary advanced trading platform and mobile app. 

FOREX.com is regulated in the United States by the Commodities Futures Trading Commission (CFTC) and National Futures Association (NFA).

Pros

  • Multiple advanced trading platforms, including the MetaTrader 4 platform
  • Competitive spreads
  • Regulated by authorities such as the U.S. CFTC and the U.K. FCA
  • 24/7 customer support

Cons

  • Limited market access

2. Best for Customer Support: AvaTrade

AvaTrade provides fully regulated brokerage services ideal for beginners and experienced traders. The platform shines with its 24-hour multilingual support desk. It also offers an impressive array of trading instruments, including forex, stocks, commodities, crypto and indices. 

AvaTrade offers an Islamic forex account and products that strictly abide by Sharia laws. The Islamic trading account allows Muslims to keep positions open for up to five days without paying a rollover fee. Rollover fees usually apply on positions kept open for more than 24 hours but are against the "Riba" concept as enshrined in Sharia.

AvaTrade's trading environment allows traders to choose between several powerful options such as WebTrader, AvaTradeGO, MetaTrader 4, MetaTrader 5 and AvaOptions.

Pros

  • Wide range of tradable instruments to choose from 
  • Vast educational resources, including trading guides, webinars and video tutorials. 
  • Excellent 24/7 customer support
  • Strongly regulated by responsible agencies in several countries

Cons

  • Unavailable to U.S. traders 

3. Best for Social Trading: eToro

  • eToro Forex
    Best For:
    Copy Trading
    securely through eToro Forex's website

    CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

eToro is a well-known online trading platform that allows traders to buy and sell a wide range of financial assets, including stocks, ETFs, commodities, forex and cryptocurrencies. The platform is known for its user-friendly interface and social trading features, which allow traders to follow and copy the trades of other successful traders.

In compliance with Sharia law, eToro offers several features that may appeal to Muslim traders. Some notable ones include zero interest on settlement for more than 24 hours, zero commission on rollovers and consistent zero rollover interest.

Pros

  • Social CopyTrader feature to help new traders learn
  • User-friendly platform
  • Wide range of tradeable assets
  • Strong regulation
  • Solid customer support through live chat, email and phone

Cons

  •  Expensive 
  •  Not available in some U.S. states

4. Best for Tiered Fee Structure: HYCM

HYCM is a leading forex broker offering access to over 69 currency pairs and various other trading options such as leverage, stocks, ETFs and commodities. Investors can open an account in as little as 10 minutes and select from a range of spread options. 

The platform supports Islamic forex trading with swap-free trading on three account levels: Fixed Islamic, Classic Islamic and Raw Islamic. 

HYCM also provides educational and investing resources for both experienced and novice traders. It is available in 140 countries but not in the United States.

Pros

  • Comprehensive educational package
  • Wide range of currency pairs
  • Varying fee structures to suit different types of traders
  • Fast and easy account opening

Cons

  •  Not available to U.S. investors

5. Best for Automated Copy Trading: RoboForex

RoboForex is a forex broker that offers online trading services for various financial instruments, including forex, stocks, indices, commodities and cryptocurrencies. 

The broker was founded in 2009 in Belize, and it's regulated by the International Financial Services Commission (IFSC) of Belize. It offers various trading platforms, including the MetaTrader 4 and MetaTrader 5 platforms, as well as a range of educational resources and customer support services. 

RoboForex offers Islamic swap-free forex trading on four account levels: Prime Swap-Free, ECN Swap-Free, ProCent Swap-Free and Pro Swap-Free. Additionally, the broker provides Extended Swap-Free status to all applicable accounts opened by clients in non-Islamic countries by default.

Pros

  • Unique automated copy trading feature  
  • Fast order execution
  • Competitive spread and high leverage

Cons

  • Limited number of tradeable currency pairs
  • Not available to clients from the U.S., Australia, Canada and Japan 

What’s an Islamic Forex Account?

Islamic forex trading accounts, also known as ḥalāl accounts, differ from regular accounts in several ways. These accounts comply with Sharia law, which prohibits the accrual of interest on deposited funds and the use of rollover swap points on positions that remain open overnight. 

Additionally, Islamic accounts require instant settlement of transactions, meaning that currencies must be transferred between accounts immediately after the trade, and the cost of the transaction must be paid at the same time. This process is intended to ensure that trades occur in a "hand-to-hand" manner, per Islamic guidance.

Here are the two primary elements of Islamic law relating to forex trading:

Riba

According to Islamic law, making money from money, also known as "Riba" or "usury," is prohibited. Riba is considered an unjust and exploitative gain made in trade or business and is, therefore, not allowed under Sharia law. That means brokers cannot charge interest.

Gharar

The practice of Gharar, which can be roughly translated as gambling, is prohibited under Islamic law. Gharar is characterized by deception and can refer to risky investments or hazardous sales. Some may argue that speculating on the forex market through trading currency pairs or contracts for difference (CFDs) constitutes gambling. However, long-term and sound investments in the capital markets, including the bond and stock markets, are generally not 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 interest accrual on the funds deposited in a trading account. Islamic accounts cannot charge interest on margin deposits or credit interest to accounts from margin trading.
  • Loans: Money transferred by a bank or financial institution as a loan to a customer with interest terms is prohibited because it involves Riba, the making of money from money. 
  • Margin trading: Trading stocks on margin involves paying interest (which would constitute Riba) for borrowing money from a broker to buy or sell equities. In contrast, trading forex on margin only requires a margin deposit and does not involve charging interest.
  • Short sales: Engaging in a short sale, which involves borrowing and subsequently selling an asset for a profit, is forbidden under Sharia law. 
  • Forward sales: Sharia prohibits agreements to buy or sell at a future date at a price agreed upon today. This rule prevents traders from entering into forward contracts or trading futures contracts. These types of transactions are considered to involve Gharar, or gambling, which is not allowed under Islamic law.

What to Look for in an Islamic Forex Account

When selecting a forex broker, it is vital to choose one that is regulated by a reputable authority, such as the FCA in the U.K., the Cyprus Securities and Exchange Commission (CySEC), CFTC in the U.S., the NFA or the ASIC. 

Review the terms and conditions of the broker's Islamic forex account, including time restrictions on the no-swap period, required deposits, dealing spreads and maximum leverage ratios. 

Other factors to consider when choosing a forex broker include the trading platform, available assets, customer support and educational resources. For traders with limited forex experience, looking for a broker that offers an Islamic trading account and is suitable for beginners may be helpful.

The Best Islamic Forex Accounts: Seeking Sharia Compliance 

An Islamic Forex account is designed to comply with Islamic religious principles, also known as Shariah law. These principles prohibit earning Riba, or interest, which is considered a form of exploitation in Islam. As a result, traditional forex trading accounts, which involve borrowing funds to trade with leverage, may not comply with Islamic principles.

Islamic forex accounts are structured to avoid the payment of interest by using an account that does not charge overnight interest or through a swap-free account that does not involve the exchange of interest between the buyer and seller of a currency pair.

In addition to these forex account structures, Islamic forex accounts may also offer additional features that are designed to comply with Islamic principles. These variations can include ḥalāl investments and avoiding specific industries considered haram or prohibited.

Note that the availability and specifics of Islamic forex accounts may vary depending on the broker and the jurisdiction in which they operate. Try to thoroughly research and compare different options to find the best Islamic forex account that meets your needs and complies with your personal beliefs.

Frequently Asked Questions

Q

Can you legally trade forex under Islamic law?

A

Yes, it is possible to legally trade forex under Islamic law, as long as the trading is done under Islamic principles.

Q

Is online trading legal in Islam?

A

It depends on the nature of the trade being conducted. A simple currency exchange is legal, but if the trade involves speculation or gambling, it is not permitted under Islamic law.

Q

Is forex Haram in Islam?

A

No, forex is not Haram in Islam as long as it is done in accordance with Islamic principles.

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