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Is online Forex trading halal and is it according to Islam?

The Islamic community is divided on whether forex is Halal or Haram. Making money and exchanging currencies are allowed in Islam because an individual has the right to improve his financial condition. While some agree that forex trading adhering to Islamic principles can be considered as Halal, some forbid it entirely. To absolutely ensure that your Islamic forex trading account is Halal, always choose a forex broker, who performs operations approved and permitted by Shari’a Supervisory Boards (SSB). In general, the following rules are applied to make forex-trading Halal:
  • Buying and selling is done on the spot, without any delay
  • Transaction currency is transferred to accounts on both sides
  • Entire money for the transaction is paid without any installments
  • Transactions are completely interest-free.

After many years of discussions, Islamic jurisprudence has stated that the trade in currency is permissible in the domain of Islam. Moreover, it has been practiced for years:
Narrated by ‘Ubaadah ibn al-Saamit (may Allah be pleased with him) who said: The Messenger of Allah (peace be upon him) said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, same for same, hand to hand. If the types are different then sell however you like, so long as it is hand to hand.” (Muslim 1587)
Obviously, to reach that a few conditions were appeared, which are as follows:
  1. Trade should be hand-to-handAccording to the Islamic Fiqh Council, under the ‘hand-to-hand’ clause, the exchange in currencies which happen over the phone or the internet are only permissible if the exchange results in immediate transfer of funds from the seller’s account to the buyer’s account or if the buyer or his agent takes immediate possession of the respective cheque payment.
  2. Immediate and without delayBuying and selling in the currency market are allowed but the exchange must be carried out at the earliest and any sort of delays should be avoided. If there is a delay, the transaction may fall under the umbrella of riba, which is prohibited.
  3. There should be no interest (riba) involvedTaking interest is strictly forbidden in Islam and there is no room for a ‘grey’ area in the matter. Hence, any currency trade transaction that involves ANY type of usury, is not allowed in Islam.
  4. The same sittingThe trade/exchange must take place in the same sitting in which the business contract is formulated.

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