swap

Islam frequently views trading as haram, but engaging in trade is possible. Finding an Islamic Forex account that allows Muslim traders to trade without incurring swap fees is crucial. It is crucial to eliminate riba from all types of exchange contracts. When used in the context of Sharia, the term “riba” refers to an illicit gain resulting from the quantitative disparity of the counter values in any transaction intended to effect the exchange of two or more species (anwa) that are members of the same genus (jins) and are subject to the same efficient cause (illa).

What Is Swap-Free Trading?

Regular and Islamic trading accounts share a lot of similarities. It’s crucial to realise that the latter account type was created specifically to adhere to Islamic teachings on online forex trading. As a result, it is different from a standard trading account in several ways, including:

No Interest

Islamic traders with accounts do not pay or receive interest rates since Sharia law forbids the accrual of interest. Additionally, transactions in accounts based on Islamic finance must be completed instantly, which calls for immediate currency transfers between accounts as well as the simultaneous payment of transaction fees. Hence the existence of swap-free trading through a special type of account called – Islamic Accounts or Swap-Free Accounts.

Spreads Are Higher

Swap interest charges are one of the brokerage firms’ major sources of revenue. As they can only get income from this category through Islamic trading accounts, they must devise a way to make up for this loss of income. To allay this worry, nearly all brokers use bigger spreads for Islamic trading accounts. This enables them to enhance their spread earnings and compensate for the cash lost when the swap costs were eliminated.

This could have various effects depending on the market participant’s trading strategy. Without a doubt, this makes scalping difficult to do with swap-free accounts. The reality is that this sort of trading entails opening and closing trades over time frames ranging from one to fifteen minutes. As a result, some scalpers make 50 or even more deals per day. Hence, the commission costs for traders might become quite high due to the higher spreads. This may significantly impact day traders, but to a lesser level.

Conclusion

Muslim scholars have established that forex trading is permissible as long as it abides by a number of rules, all of which are outlined in the terms of our Islamic accounts. Sharia Law permits currency exchange and profit because everyone has the right to engage in activities that enable them to improve their financial situation.