Islamic Forex

The Forex market and specifically, the retail market has traders from all around the globe. As a result, new types of trading accounts were created to fill the needs of the different types of Forex traders. One such account is what is referred to as Islamic Forex accounts.

The reason they are called Islamic Forex accounts or Shariah forex accounts is not because you must be a Muslim to open an Islamic Forex account. That might cause legal problems. The reason they are called Islamic Forex accounts is because they were created to meet the needs of the Islamic trading community.

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According to Islamic law, or Shariah law, it is forbidden for Muslims to expect anything in return for their giving, and it is therefore forbidden to pay or accept any sort of interest in the financial markets. Islamic Forex accounts offer No Riba Forex (Forex with no interest).

This is very relevant when it comes to the Forex market and the concept of rollover fees. Rollover fees are interest fees that Forex traders pay when leaving a position open overnight. They are also referred to as SWAPs and are intended to cover the fees that the banks charge for leaving transactions open overnight. Islamic Forex accounts are therefore Swap free Forex.

Islamic Forex accounts are regular Forex accounts without any sort of interest fees or commissions. As mentioned, you do not have to be a Muslim to open an Islamic Forex account, but they do generally come with certain downsides. These might include higher spreads, hidden charges, or a limitation on how long a position can remain open.

Additionally, if a client opens an Islamic Forex account and abuses it by implementing Carry Trades, the Forex company will most likely close the account. Carry Trades are when the trader opens one Islamic Forex account, and one standard account, and uses the two accounts to balance each other out. What ends up happening is that the trader walks away with the difference, which in this case is the earned interest.

In conclusion, Islamic Forex accounts are very common with many Forex brokers, but must be used wisely and responsibly, just like everything else in Forex trading. The following are some of the primary characteristics of islamic Forex trading accounts:

• Swap Free Forex Account: In Forex trading, when traders leave positions open overnight, it is referred to as a rollover. This usually entails rollover fees, but when trading with a Forex Islamic account, these fees are waved.
• No Riba: According to Islamic law, giving or taking interest on transactions is strictly forbidden. This of course presents a problem when dealing with banks or other financial institutions. With Forex Islamic accounts, all "Riba" charges are canceled.
• Musharaka: This term refers to a collaboration between two players. In this case, the profits and losses are split based on a predefined ratio.

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