Swap Free Trading

What Are Swaps?

A swap is an interest you either pay for or earn on a deal you hold overnight in the forex market. Swap costs are established based on the length and duration of your open trades. Swaps are also known as “rollover fees.” Swaps can be utilised to hedge a number of hazards, including the interest rate and currency risk. For a Muslim trader who follows Islamic finance laws, these swap fees threaten their religious beliefs. As a result, brokers provide Swap-free Islamic trading accounts to Muslim traders who faithfully follow the Islamic rules of finance set by Shariah law since they are conscious of the importance of religious beliefs.

What Are Swap-free Accounts In Forex Trading?

Swap-free accounts are Shariah-compliant forex trading accounts specially created for Muslim traders who want to trade in a halal way. Shariah laws are a moral code that all Muslims are expected to follow in general life. Just like various aspects of life, Shariah also has several laws for trading. One such law is that Muslims are strictly prohibited from taking or giving any sort of interest, whether in trading, business, etc. In swap-free accounts, traders do not have to pay any interest or swaps no matter how long the position is open during a trade. Hence, Muslims can easily trade in the financial markets without any worries.

No matter what religion a trader belongs to, they must pay interest or rollover fees in a regular trading account. Thus, it makes it difficult for Muslims to trade in the regular accounts provided by the broker. If the Muslim trader is a Scalper, then it’s fine, as there are no overnight positions. But, if the trader uses a long-term approach, such as swing trading, the money made will be haram due to the conflicts of interest inherent in the transaction. Also, in Islamic accounts, Muslim traders are exempt from additional charges and widening spreads; they only have to pay fixed spreads to the broker.

Is Trading In A Swap-free Account Halal?

Yes, the money you earn in a swap-free account is completely halal. That’s because traders do not have to pay overnight rollover fees, interests, margin deposits, loans, and short sales. As the name implies, Islamic account holders only have to pay fixed spreads for the transactions in swap-free accounts. There’s no additional need to pay or receive interest rates or rollover fees.

Conclusion

It is crucial to note that others cannot open a swap-free account other than Muslim traders. Before opening a swap-free trading account, you might be asked to provide identification documents that verify that you’re a Muslim. Swap-free Islamic accounts are a great alternative to conventional accounts because they maintain sharia law and provide Muslim traders with proper trading conditions. However, there are significant disadvantages like higher trading fees, etc. Therefore, whether or not you use a swap-free account will ultimately depend on your financial objectives and dedication to upholding moral standards.