Foreign Exchange Trading - An Islamic perspective

General consensus is that foreign exchange markets trading is permissible under Islamic law where the trading is of one currency for another.  However, there is some debate whether forward trading on foreign exchange markets is prohibited under the Riba prohibition rules of Islamic law. Some of the differences in opinions are because of the varying interpretation of Fiqh by the various schools of thoughts.

However, despite such differences, foreign exchange (forex) trading has been exercised by numerous Muslims in the Middle East for many years. For most, investing in the foreign exchange markets has been the best source of investment, especially when stock trading has not been very easy until recently for people living in the Middle East.  

In very simplistic terms, forex trading works very similar to stock trading. Foreign exchange trading involves investing your funds in a certain currency and selling later when prices are favorable. For example, a few months ago, the exchange of the US dollar to British Pound was very close to 1 US dollar to 1 British Pound. However, lately, one British Pound is approximately equivalent to 2 US dollars. If you would have bought British Pounds at that time, you would have almost doubled your money by now.

Very recently, Foreign Exchange trading has become very easy for the common person by the way of Internet based Foreign Exchange Markets. Investors worldwide can open an account for as little as $100 and buy other currencies. Later, you can sell if the currency moves in the right direction. Obviously, investors should research before investing in any currency. If interested, you can open a foreign exchange trading account for FREE for as little as $100. The $100 will be in your account and you can use those funds for buying other currencies. No matter where you live in the world, you can open a foreign exchange trading account right now with HilalPlaza’s affiliate partner by clicking here.The company is allowing everyone to open an account for FREE for as little as $100....

How foreign exchange trading works

To instigate a foreign exchange transaction, you need to simultaneous purchase one currency at the same time as selling another. Every foreign exchange transaction involves a long and short currency.  The “long” currency will be the currency you purchase, while the “short” currency is the currency you sell

Pros to foreign exchange trading

There are no commission fees with foreign exchange trading as dealers make a profit on the “spread” – the difference between the rate they buy the currency at and the rate they sell this to you.

• Trades are instant

• The market is open 24-hours a day

• The market is too big for one player to influence the price

• There is no fixed trade size

• There are no middle-men

• Internet access makes it a cheap and economical means of investing

Cons to foreign exchange trading

• The market is 24-hours a day, meaning you could be at risk overnight

• Need to know when to get out of the market

• Weekends could leave you exposed for a long period of time

• There are lots of technical jargon terms you will need to learn

• Not all foreign currencies are traded on the foreign exchange market and most that are, are “strong” currencies, such as the dollar, Euro, pound, yen, etc.

 For further reading on Islamic perspective of foreign exchange trading see:

            http://vlib.unitarklj1.edu.my/htm/islamforex.htm

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