In the world of Forex trading there is much to learn about currency exchange. In the world of Islamic Forex Trading, there are a lot more things to be considered than just the exchange of currency or precious metals. Until recently Forex trading was not being done in the Islamic world. This was mainly due to the fact that “Shariah Law” forbids many of the Forex standards.
In Islamic Forex Trading, there are no trades allowed that cannot be completed at the time of the trade. For example you cannot make a trade that will take six months to complete. You are only allowed to purchase foreign currency for the current trade value. If you make a profit you must be charged interest on it.
When trading for gold you must also trade with something of equal value. The same is true for trading silver or less precious metals.
Islamic Forex Trading accounts are set up to create a swap free account. This means that no swaps will be accounted to positions overnight. These accounts are set up for customers who believe that swaps are contrary to their religious beliefs.
The Islamic Forex Trading accounts do not receive or pay overnight interest or carry on positions in accordance with their religion. There are zero up-front commissions and no additional charges on these accounts.
In the Islamic Forex Trading account the interest payments on account balances is waived. Instead of swaps, the account will be charged a service charge on each lot left on the currency trade.
Forex traders have found a way for persons with Islamic beliefs to participate in the fast growing Forex market. The majority of Islam fundamentalists agree that Forex trading can comply with Sharia only if it is spot trading and doesn’t involve earning any overnight interest on the account. As long as the trading doesn’t involve Riba (unlawful gain) it is considered to be legal in the Muslim world.
Forex is basically trading one currency for another. Some Islamic scholars tend towards the thought that since there is a lot of volatility and speculation, it should not be permissible under Islamic law. It is compared to day trading which is not allowed under any circumstance in the Islamic world. You are not allowed to sell what you do not have in your possession. Therefore, you cannot purchase what you cannot take immediate possession of. This eliminates the speculative aspect of regular Forex trading.
You must take into account that some experts in Islamic law will interpret the laws differently and that you must be very careful to follow your beliefs very strictly to avoid being unlawful in your business ventures. Find a knowledgeable Islamic Forex Trading advisor to help you get started. They must be aware of all the rules on profits and loss. A great deal of experience would be helpful and you should check the credentials of the person you want to work with. When you are a little more experienced in the business end, you will be more comfortable with your Forex trading.