FEATURES OF ISLAMIC ACCOUNTS FOR TRADING IN BINARY OPTIONS AND FOREX

The enormous influence of Islam on the lives of modern Muslims can be traced by studying a list of prohibitions in the financial and credit sphere, which is based on Sharia law.

Saqib Iqbal Author
4 min read
Published: February 15, 2019
Updated: December 13, 2022
Views: 302

Many Europeans can not believe that in the 21st century, a loan with interest or bond trading can be perceived as a terrible crime. No matter how strange it may sound, Muslims respect and observe the religious teachings and traditions of their ancestors just as they did centuries ago.

Sharia laws have become a serious obstacle for financiers, bankers, owners of brokerage companies, etc., who do not want to lose the very promising markets of the Middle East, Asia, and African countries.

Since it is not realistic to change the Quran and the centuries-old traditions of the faithful, there was only one way out — to alter the trading market language so that it does not contradict the teachings of the Prophet Muhammad. As a result, many brokers have introduced such a service as “Islamic accounts.”

Islam Forex Market

The Forex market and binary options in Islam are prohibited activities that the faithful will never engage in (if we consider them in the classical form). Work on trading floors includes elements that violate Sharia law. These include:

Misir. Muslims are not allowed activities involving “easy money.” A person must make a profit by investing his capital or labor. Casinos, gambling, etc. are unacceptable for the faithful.

On the other hand, work on trading platforms is connected with the search and analysis of the necessary information, the study of charts and the identification of factors that influence the value of assets. How can such a job be considered “easy money”? This attitude is quite satisfying for the Muslims who have decided to make money on the forex market and other areas of online trading.

Gharar. Includes trade in goods that the party does not own the transaction, and it also includes the speculative risk of operations (for example, trading with leverage).
Riba. In Islam, usury is not allowed. In this case usury happens between the broker and the trader. Although not everyone agrees with this statement, referring to the fact that fees for service and usury are two different things.

Features of Islamic forex accounts

Islamic accounts for working in the foreign exchange markets are missing all the elements that resemble the above prohibitions.

Their main features are:

Only fixed spreads are used.
There are no interest, hidden fees or payments.
It is prohibited to use Swaps. Open positions are not closed at the end of the day, and the trader does not pay a fee for transferring them to the next day.

Another important point that is associated with the opening of an Islamic account. For this procedure, the future trader must provide proof of their religious affiliation. No more additional documents are needed.

Binary options trading for Muslims

The main reasons for the prohibition of binary options in Islam are:

The accrual of winnings in case of a successful transaction is carried out as a percentage, which is strictly prohibited by the laws of Sharia.
These operations resemble gambling.
At the heart of transactions is often a real asset.

As in the case of accounts for the currency markets, binary options trading for Muslims is carried out without the use of Swaps. Many brokers allowed potential clients to open Islamic accounts and work on the trading platform, where the trader did not rely on changes in the direction of the value of the asset, but invested money in projects that are not prohibited by Sharia law like NordFX.

Illegal binary options in Islam allow Muslim traders to open Swap-free accounts that can be used for long-term transactions. Without paying interest on the transfer of positions, such operations make it possible to get additional profit, which was used for a long time by traders who had nothing to do with Islam.

Based on the above information, it can be concluded that Muslims, despite the prohibitions of the Sharia to earn income using traditional brokerage companies, can engage in online trading. In this case, the abolition of commissions and Swaps allowed traders to find additional sources of income that are not available to owners of ordinary accounts.

This factor was the reason that brokers began to demand that everyone who wants to enter into transactions without violating Sharia law, prove that they really are Muslims. “General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”