5 Best Islamic Forex Accounts in 2021

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Not all brokers offer an Islamic Forex account, but those that do open up trading to millions of Muslim investors. See below the top valued Islamic brokers, thoroughly examined and selected by our expert analysts.

1
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
Best all around broker
High floating leverage + fast execution
2
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
ECN-style trading
Daily market research and Autochartist access
3
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
High level regulation in multiple jurisdictions
Impressive range of tradeable assets including vanilla options and gold options
4
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
Best social trading platform on the market
Excellent choice of options for crypto traders
5
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
Marketsi strategy builder helps traders trade smarter
Competitive trade execution with low slippage

Top Islamic Forex Brokers at a Glance

FXTM, Best all-around: high floating leverage + fast execution.
FP Markets, ECN trading with leverage up to 1:500.
AvaTrade, Highly regulated, choice of fixed or floating spreads.
eToro, Best broker for social traders and crypto traders : 75% of retail CFD accounts lose money.
Markets.com, Excellent educational offerings.

FXTM

5.0/5 in this category
In Summary
Best all-around: high floating leverage + fast execution

The Financial Conduct Authority (FCA) authorizes the FXTM UK division, where client deposit protection up to £85,000 exists via the Financial Services Compensation Scheme (FSCS). Additional regulatory oversight applies from the Cyprus Securities and Exchange Commission (CySEC) and the Financial Services Commission (FSC) of the Republic of Mauritius. Opening an Islamic account with FXTM is quite simple. You simply open any account type (except one that uses MetaTrader 5 which is not eligible) as normal, and then just “enable swap-free mode” in the “accounts overview” section. The option is only available to residents of certain countries. It is not possible to trade exotic currencies in an FXTM Islamic account.

FXTM Pros & Cons

Pros

  • Excellent commission-based Forex pricing environment and transparency

  • Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app

  • Quality market research and educational content for beginner traders

  • Proprietary copy trading platform, low minimum deposit, and high leverage

Cons

  • Limited choice of cryptocurrencies and commodities

FP Markets

5.0/5 in this category
In Summary
ECN trading with leverage up to 1:500

FPMarkets presents one of the top Forex and CFD brokerage options for Islamic traders all over the globe.  Based in Australia, FPMarkets features both Web-based and IRESS platform along with MetaTrader 4 (MT4) and the MetaTrader 5 (MT5) platforms. Established in 2005, FPMarkets is regulated through the Australian Securities and Investments Commission (ASIC) as well as by the Cyprus Securities and Exchange Commission (CySEC), with additional regulation through the Financial Services Authority of St. Vincent and the Grenadines. Interestingly, Australia’s financial regular, ASIC, is somewhat more lenient than regulators in the USA or EU, when it comes to leverage. This leniency towards leverage has allowed FPMarkets to offer Islamic traders leverage as high as 500:1.

FP Markets Pros & Cons

Pros

  • Choice of trading platforms and auxiliary trading tools

  • Very competitive cost structure and excellent asset selection

  • Low minimum deposit requirement and leverage of up to 1:500

  • Well-regulated and trustworthy

Cons

  • Availability of Iress geographically restricted

AvaTrade

5.0/5 in this category
In Summary
Highly regulated, choice of fixed or floating spreads

AvaTrade is widely regarded as a trustworthy broker, and in fact was one of the first online retail Forex / CFD brokers. While its primary regulator is the Bank of Ireland, the Australian Securities and Investments Commission (ASIC), Financial Services Agency (FSA) of Japan, the Financial Sector Conduct Authority (FSCA) of South Africa, British Virgin Islands Financial Services Commission (FSC), the Abu Dhabi Global Market Authorities Financial Services Regulatory Authority (FSRA), and the Investment Industry Regulatory Organization of Canada (IIROC), complete the global framework. AvaTrade offers an Islamic account option, not as a standalone account, but rather as an Islamic version of any other account type.

AvaTrade  Pros & Cons

Pros

  • High-quality educational offering via SharpTrader

  • Excellent choice of trading platforms catering to various trading needs

  • Broad asset selection and cross-asset diversification opportunities

  • Well-regulated and trusted broker with oversight from a central bank

Cons

  • Trading costs competitive but nothing special

eToro

4.5/5 in this category
In Summary
Best broker for social traders and crypto traders : 75% of retail CFD accounts lose money

eToro is regulated in Cyprus, the U.K., Australia, and the United States although its U.S. offering is firmly differentiated from its offering to the rest of the world. eToro guarantees several benefits to anyone opening an Islamic account: no rollover interest or commissions on any trade contracts lasting for longer than 24 hours will be charged, and no commissions or fees are charged to Islamic accounts for account management. Notably, interest-free leverage is also offered to Islamic account holders.

eToro  Pros & Cons

Pros

  • Active investment community ideal for social trading

  • Dedicated tools for social trading

  • Broad cryptocurrency selection

  • Expanding educational offering for beginner traders

Cons

  • Internal withdrawal fees

  • Low retail leverage and higher minimum deposits, but within a reasonable range

Markets.com

4.5/5 in this category
In Summary
Excellent educational offerings

Markets.com uses a hybrid execution model that places it between market maker execution and straight-through processing (STP). As you might expect from a Forex broker with a strong global presence, traders are able to open an Islamic-friendly account with Markets.com which operates in line with Sharia law principles of interest-free trading. Of course, residents of countries other than South Africa are also very welcome to open an Islamic-friendly account type to avoid any interest element of trading which would conflict with Sharia law.

Markets.com Pros & Cons

Pros

  • Very Competitive Forex Fees

  • Very Wide Choice of Assets

  • Choice of Trading Platforms

  • Excellent Customer Support

Cons

  • Commodities and Indices Fees Higher than Forex Fees

What is an Islamic Forex Account?

 According to Islamic law, often referred to as Sharia law, Muslims are prohibited from earning interest on their giving. This law also applies to interest earned on any banking or investing. Many brokers offer these traders the possibility of trading Forex according to Sharia law by opening an Islamic Forex account where interest-free Forex trading is made available. This is also called a ‘No Riba Forex’ account.

The team at DailyForex examined the top Muslim friendly Forex brokers and has compared them in an easy to read list where you can determine which Islamic Forex broker is the best one for you.

Today, many brokers around the world are keen to offer Islamic Forex accounts for those who want to comply with Sharia law. This article will help you choose the best Islamic Forex broker for you and shine some light on the criteria you should be using as you make your choice.

An Islamic Forex Account is a Forex trading account that abides by Islamic law, known as the Sharia. Those who follow this law are guided by the Quran, the sacred book of Islam, and they must obey certain standards and practices to maintain lawfulness.

What makes a Forex Islamic account halal? Forex brokers wishing to attract Islamic clients have are a few basic principles they must apply to at least segment of their offering, thus creating the Islamic account. These concepts are a bit different from what the western world might understand as traditional banking or trading. Below, we explain three of the key concepts of Islamic law most relevant to the question of an Islamic Forex account.

Riba

“Riba” means increase, excess or addition and it refers to financial interest. It is seen as a type of usury and selfishness that can lead to hoarding. The charging of usurious interest as a business practice is deemed to have an adverse effect upon the Islamic ideal of fellowship in the community and is therefore prohibited under Sharia law.

Gharar

“Gharar” refers to risk, more precisely defined as “the sale of what is not present” and is a haram (forbidden) practice in Islam, forbidden by Sharia law. Those who abide by the Sharia may not gamble, sell short (in the traditional sense commonly referred to in stock trading), or conclude agreements which might involve uncertainty or chance.

The Mudharabah Arrangement

A “Mudharabah arrangement” is an arrangement or partnership between two parts: the financial role and the management of the funds. The financial role will invest, and the other will control the money.

However, in Sharia law, the Mudarabah Agreement can be restricted. This means the investor will only allow the one who manages the funds to administer them in a certain type of business or location. If it is unrestricted, it indicates that the management of the funds have no constraint.

Musharakah Arrangement

“Musharakah” means “to share”, and it is another type of partnership permitted by the Sharia law where both parties will benefit from earnings in a trade. In this way, the financial part will earn without having to go against the rule against Riba.

Losses must also be shared by those in a Musharakah Arrangement, but the amount of such will depend upon the amount of invested capital. On the other hand, the divided profit is previously set according to the agreement on the contract.

How to Choose an Islamic Forex Account?

If you would like to choose one of the best Islamic Forex accounts, there are some important elements to keep in mind. We have added below some of the essentials to consider.

Regulations

Regulations are important for all traders when choosing from a list of the best Islamic Forex brokers. Regulations will guide, restrict, and instruct brokers on how to administer accounts.

The relevant regulatory bodies will protect traders from fraud or any other illegal misconduct. It is common that the top Islamic Forex brokers are compliant with more than one regulatory body. Islamic banks emit a guarantee to confirm the liability of the client’s financial position and religious faith. Also, there are certifications for Forex Islamic accounts in Halal.

What is a Swap-Free Islamic Account in Forex? How do Commissions on Islamic Trading Accounts Work?

A swap is a fee that is charged to those who leave a position open for more than 24 hours. It is a type of interest and therefore, it is not allowed for those who comply with Sharia. The solution for most brokers is to apply fixed fees or commissions on Islamic trading accounts that maintain longer-term overnight positions.

No-Swap Period

Some brokers will only allow you a limited amount of time in which you can trade swap free. This is known as no-swap or swap free periods. Only the better Islamic Forex brokers will allow unlimited swap free trading.

Terms & Conditions

It is always important to read the terms and conditions published by any Islamic Forex broker because that is where the small print is. For example, the broker may not charge an interest rate, but there will most likely be a commission instead, so it is important to be sure of all such terms as these will probably affect your cost of trading when you open an Islamic trading account.

Islamic Prohibitions

According to Sharia law, there are a number of prohibitions applicable to Islamic traders. These reflect Islamic guidelines aimed at ensuring a prosperous and peaceful community. The major prohibitions are outlined below:

Overnight Rollovers

Overnight rollover is the interest that a trader is charged (or sometimes paid) for holding a position overnight. As an Islamic trader you will probably be charged a fixed commission per trade instead to make up for not being charged a commission. It is important to note that in most cases, each currency will have a different interest rate and therefore most likely differential commission rates, so it might be a good idea to look at the applicable fee before opening a position in a particular Forex currency pair or cross.

Interest on Margin Deposits

A margin deposit is an interest based on the cash deposit made with a Forex broker, which a few brokers offer to larger clients. Since margin trading involves a higher risk, the trader must present an initial amount before opening a leveraged position. Interest on margin deposits is not permitted in an Islamic Forex account since it goes against the “no Riba” principle.

Loans

Those who are compliant with Sharia law may not receive or give loans with interest.

Margin Trading

The Riba principle is broken by any trading on margin because margin involves the loan of money at interest given out by a lender who seeks benefit. Even if it has 0% interest, it still arguably may be a loan where the broker seeks benefit (an end profit made by the exchange).

Short Sales

Short sales (in the sense of shorting an equity) go against the Gharar principle because a true short seller is selling something they do not own. The Gharar principle is against “the sale of what is not present”.

Forward Sales

A forward sale is an agreement between two parties to buy or sell an asset at a specified price at a future date. Again, it is contrary to the Gharar principle.

How to Open an Islamic Trading Account?

In order to open an Islamic Forex account, you might be asked by the broker to present a few documents, such as your ID and a document as proof of your faith.

An Islamic trading account attempts to apply Islamic Sharia law to online Forex trading. Therefore, it is for Muslims; those who wish to follow the teachings of the holy Quran. The Quran prescribes a religious law known as the Sharia that has certain rules on how humans should live in society. It includes principles of behavior on finance, family matters, nutrition, and more.

Is it Halal or Haram for Muslims to Trade Forex?

Both Halal and Haram are terms that are applied by Islamic doctrine to all aspects of life. Haram means anything that is forbidden by the Islamic law. Halal, on the other hand, are all the practices that are allowed by the Sharia. We have examined this question elsewhere in detail.

What Can I Trade with an Islamic Account?

Islamic accounts can offer any markets for trading if the asset itself is compliant with Sharia law, as long as the basic principles against Riba etc. are honored. However, some assets are not. For example, an Islamic account could not offer trading in the shares of a company which manufactures alcoholic beverages as such beverages are forbidden in Sharia and no Muslim should profit from them.

Advantages & Disadvantages of Islamic Accounts

One of the best advantages of Islamic accounts is that those who are Sharia compliant can trade without going against their beliefs. Also, without any swap fees, traders can go a long time without being required to make any interest payment. Another benefit is the Mudarabah Agreement where both parts will share profit and loss.

A potential disadvantage of an Islamic account is that you may sometimes need to pay quite a lot in commission in place of overnight swap fees.

 

Islamic Forex Brokers in Malaysia

Malaysia is an emerging Asian economy, and Forex trading is gaining popularity there. The Securities Commission of Malaysia (SCM) is the financial regulatory body, issuing a Capital Markets Services License (CMSL) to international brokers. While all brokers are allowed to accept traders from Malaysia, those holding a CMSL offer an additional layer of security and a dispute resolution mechanism that can hold the broker accountable in case of malpractice and fraud.

Since the SCM published a new directive for contracts of difference (CFDs), amending the Capital Markets Services Act of 2007, which took effect in July 2018, more brokers are pursuing a CMSL to validate their standing among a growing number of retail traders. The SCM maintains a Public Register of License Holders on its website, and traders may check the Malaysian website of their preferred international broker and cross-reference the given license number with the SCM database.

Bank Negara Malaysia, the country’s central bank, directly regulates Forex brokers and issued guidelines on cryptocurrencies, an asset class enjoying increased popularity, especially among younger retail traders. Some confusion exists over the legality of Forex trading in Malaysia. It is legal for Malaysians to trade with offshore brokers, as long as they are compliant with domestic laws. They include RM10 million in up-paid capital and adjusted net capital of RM500,000, which is an estimated $2.5 million and $125,000, respectively.

There are three things Malaysian traders should seek from their broker. Primarily, an Islamic account compliant with Sharia law. It is essential to read the terms and conditions carefully, as sometimes the minimum deposit is increased, or the swap-free offer is time-limited. Local bank transfers in the Malaysian Ringgit will ensure easy money management to and from the broker, while mobile trading remains a fast-growing trend across the Malaysian retail sector. More brokers offer all three core elements to gain a more prominent market share of the expanding Forex market in one of Asia’s fastest-growing economies.

FAQs

What is an Islamic trading account?

An Islamic trading account is a trading account which operates in compliance with Islamic Sharia law. Islamic trading accounts have certain principles they must adhere to in order to respect Islamic social fellowship.

Is Forex halal or haram?

Trading Forex through an appropriate Islamic Forex trading account can be halal not haram.

What does Islam say about online Forex trading?

Islam does not say anything specific about Forex trading, although it does have rules governing commerce and exchanges of value, which must be “hand to hand”.

What is a swap free account in Forex?

A swap free account in Forex means that you will not be charged or paid swap interest if you decide to keep a trade position open overnight. You will be charged the difference, more or less, another way, most likely by commission.

Huzefa Hamid

I’m a trader and manage my own capital. I trade the major Forex pairs, some Futures contracts, and I rely entirely on Technical Analysis to place my trades. Today, I am also a Senior Analyst for DailyForex.com. I began trading the markets in the early 1990s, at the age of sixteen. I had a few hundred British pounds saved up (I grew up in England), with which I was able to open a small account with some help from my Dad. I started my trading journey by buying UK equities that I had read about in the business sections of newspapers. The 1990s were a bull market, so naturally, I made money. I was fortunate enough in my early twenties to have a friend that recommended a Technical Analysis course run by a British trader who emphasized raw chart analysis without indicators. Having this first-principles approach to charts influences how I trade to this day.