Is Forex Trading Halal or Haram?

Forex trading is a challenging yet attractive subject to many people worldwide. It is referred to as “Foreign Exchange Trading”. It means that any money you deposit into your trading account will be traded as fiats (like dollars and pounds) and not as stocks. The foreign exchange market never sleeps; it works twenty-four hours a day, five days a week, throughout the year. As such, there are only two sessions in a day where price fluctuation is minimum: from 4:00 am EST to 10:00 am EST and from 5:00 pm EST to 11:pm EST Monday through Friday.

Forex trading can be a complex ordeal for the new trader. With all of the hype surrounding the Forex market, it is not surprising that many people are interested in trading currencies. As every day more and more people are starting to trade online to make extra money or even secure their financial future, how can you determine if forex trading is Halal (permitted) or Haram (forbidden)?

Forex Trading – Halal Or Haram?

The answer is… it depends on who you ask! Unfortunately, religion does not give us clear answers on financial matters, but several opinions range from approvals to complete forbiddance of this market. Here we will look at why some consider Forex Halal and others Haram and examine how you can make your own decision.

What does forex trading entail?

Before we jump into the religious rules behind trading currencies, it is essential to know what forex trading entails. Forex trading is simply buying or selling one currency for another, intending to profit from an increase in value of that particular currency over time.

For example, if you buy Euros, you might expect the Euro to go up against the US Dollar (USD), so then you could sell off that number of Euros for more Dollars than you initially invested.

Now here comes the grey area. If this sounds like any gambling transaction, it’s because, at its core, there are many similarities between both types of transactions. With Forex, traders often put their money on “borrowed” currency pairs with the hope that the value of the currencies will change in their favour by the time they have to repay their loan. In this way, Forex trading can be seen as a form of gambling, and some people believe that Islam forbids gambling altogether.

Is forex Halal?

The most common argument for why Forex Trading is Halal is based on a quote from the Quran, which states, “trade is Halal except for what is mentioned explicitly.” The interpretation of this verse has led many people to believe that any form of trading is permissible, as long as it does not involve alcohol, pork products, or any other type of prohibited item. Forex traders often use this argument to justify their trading activity, claiming no explicit prohibition against trading currencies.

Is Forex Haram?

On the other hand, many people argue that Forex trading is Haram based on two main points. The first is that Forex traders are essentially gambling on the future value of currencies, and the second is that it is often difficult to trade without taking on significant risk. For these reasons, many people believe that Forex trading falls into the category of gambling which Islam explicitly forbids.

So who is right? 

Ultimately, only you can decide if forex trading is Halal or Haram for you. If you feel comfortable with the risks involved and believe that you can profit from trading currencies, then go ahead and give it a try! Just be sure to do your research and understand the concepts behind currency trading before you get started.

Bottom line

Remember that the Shariah law on trading currencies is ambiguous, which means it can be Halal or Haram, depending on who you ask! If you are a practising Muslim, make sure to check with your Imam before starting your very first forex trade.

Follow this link for the best forex broker in Pakistan.