As per the previous year’s reports from ‘The Modern Trader’ and BIS, there were around 13.9 million traders taking part in the volatile forex market. Based on recent research done by Professor Robert, this figure is expected to cross 14.5 million in the year 2024. This includes traders from all parts of the world, and will obviously be made up of people with different cultural and religious beliefs. Each religion has established a set of values, ethics and morals that have to be followed by respecting the rules taught by the religion or faith. Speaking about Islamic traders, they are bound by the rules of Islamic finance which may make trading on a regular account quite difficult for them. Many forex brokers are well aware of this fact and have come up with the idea of Islamic accounts, which will allow these traders to participate in forex trading without breaking the rules established by their religion. Read More
By the end of this article, you will get to know more about the usage of Islamic accounts and will also get a list of the 7 best Islamic forex brokers of 2024 that you can consider for opening an Islamic trading account.
Forex Trading on Islamic Accounts
Islamic accounts are swap-free trading accounts which cater to the needs of Muslim traders. Swap in forex can be defined as the interest earned or paid while keeping a trade position open for more than a day, or in other words, it is the rollover charges applied on overnight trade positions.
The element of interest is not acceptable for Muslims based on the rules of Islamic finance and Sharia law. They strictly prohibit believers from engaging in any financial activity that involves receiving or giving interest on a principal amount. This even applies to bank deposits and financial loans. Forex swap is also a form of interest that is applied when we buy and sell currencies for trading.
Swap doesn’t come into play when we follow short-term trading strategies like scalping or day trading. But every time a trade position is on hold or open overnight, that will result in a long swap or short swap based on the type of position.
If you are wondering what is long swap or a short swap, then here’s the answer:
Long Swap: When a trade position is opened for buying the base currency, it is referred to as a long position. As such, when that long position is held open for more than a day then the trader will have to pay interest charges or rollover fee, which is known as long swap.
Short Swap: When the trader enters a trade to sell the base currency, that will be called a short position. Whereas for a short position, the result will be a short swap as the trader gets to earn interest from the broker.
So, like we said before, the act of paying or earning interest is Haram for Muslims based on the Sharia law. Based on this Muslim traders have 2 options to avoid swap.
The first one is not keeping any overnight position for which you will have to close all your trades before the rollover point or before the trading day ends. But this is quite difficult to do as the rollover point may be different for each broker and you will have to close the trades before the moment at which interest will be charged or applied. This means you cannot engage in swing trading or position trading which are very common and popular long-term strategies among forex traders.
The second option is to look for halal forex brokers in order to open an Islamic account with them. An Islamic trading account completely removes the element of interest or swap making it possible for a Muslim trader to follow long-term strategies on their account and keep open positions for however long they want.
Best Islamic Forex Brokers to Open an Islamic Trading Account
Since we have already discussed the purpose of trading on an Islamic account, now we can move forward with the list of halal forex brokers you can choose for trading on the best Islamic trading accounts.
Fxview – Fxview is a leading forex broker licensed and regulated by multiple authorities including CySEC. They have been serving a lot of clients around the world as a low-cost broker with ECN connectivity. Their Islamic accounts also have raw ECN spreads starting from 0.0 pips and a commission of $1/100k per side. You won’t have to pay any extra charges for positions that are closed within 3 days. After that, there will be some charges which will be applied based on the instrument you trade with. This means you will have to pay these charges only from the 4th day of an open trade.
IC Markets – IC Markets is a popular forex broker offering various account types including Islamic forex trading accounts for Muslim traders. They are also regulated by different authorities including CySEC. Muslim Traders can get a swap-free trading experience along with tight spreads on both raw spread accounts and standard accounts. The commission will be $3.50 per lot payable per side on the raw account and standard accounts are commission-free. But in both cases, there will be a flat rate financing charge applied for overnight positions on certain instruments. The charges will be applied when you keep a position open for more than a day.
XM – XM is a well-known forex broker with multiple regulations and licences, including CySEC. You can submit a request for an Islamic account through the members’ area which will grant swap-free access to your account. They provide commission-free accounts and spreads will vary depending on the primary account type chosen by you at the time of registration. The spreads on micro and standard accounts are 1 pip on major pairs and for ultra-low spreads start from 0.6 pips. There are no other charges that are specified in case of overnight positions kept open on swap-free accounts.
FXTM – FXTM is a globally regulated forex broker with a valid licence from FSC. They provide Islamic accounts through their global website where you can register for a swap-free account. You can get started with low-cost halal forex trading but there will be a swap-free fee when the trader opens several positions overnight and goes over the specified swap-free day allowance.
FXCM – FXCM is a reputed forex broker regulated by various authorities including ASIC. They offer Interest-free accounts for Muslim traders which function as Islamic trading accounts. You won’t be charged any interest but there will be a markup on spreads and additional commission depending on the primary account type and instruments chosen for trading.
XTB – XTB is an established forex broker regulated by multiple authorities including FCA. They offer Islamic accounts to traders from certain countries only. This includes UAE, Saudi Arabia, Kuwait, Oman, Qatar, Jordan, Bahrain, Lebanon, Egypt, Algeria, Morocco, Tunisia and Malaysia. So, if you belong to any of these countries, then you can easily apply for an Islamic trading account with this broker.
AvaTrade – AvaTrade is a popular forex broker regulated in different countries with licences from various authorities, including ASIC. You can submit a request for opening an Islamic account with them but there are certain limitations that you need to keep in mind. When you keep a position open for more than 5 days, the swap charges will be applied even if it is an Islamic account.
As you can see, each broker does have a different approach when it comes to Islamic trading accounts. The trading conditions, charges and working of the Islamic account will be different with each broker even if they all are introduced with the very same purpose. Hence you need to take your time and make a wise decision when it comes to choosing the best Islamic forex broker. Make sure you are getting the best trading conditions on your Islamic account as well as flexibility in terms of the trading styles and strategies that you can follow.
We hope that you can choose the best one for you based on the above-given information because choosing an ideal broker is very important for getting the best trading experience on Islamic accounts. Let us know which Islamic Forex broker would you like to open an account with!
