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Islam and Trading
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gbpusdg

Biedrs kopš Sep 19, 2017  35 ieraksti gbpusdg Sep 25 2017 at 14:46
Islam and trading:

Aim here is to discuss the legitmacy of 'trading' forex or any other instrument for short-term gain.

My understanding is as below:

Any form of 'trading', where there is zero intention of taking delivery or using the FX proceeds for valid commercial purposes is considered HARAAM.

Trading forex where there is a legitimate need for different FX currencies, ie. going on holiday, need to send money abroad, buying items from abroad, all these are valid and legitimate reasons for exchanging one currency for another.

Where there is zero intention of taking delivery, where the only objective is to try and guess if a currency will rise/fall, is considered gambling and is strictly forbidden in Islam.

This applies to stocks as well as stocks or any other trading.

Islam is about responsible ownership and most short-term traders do not care about responsible ownership, they are just worried about short-term price movements.

Also, shorting something you do not own, is strictly not allowed in Islam ie. if you have a US$ account and you sell dollars for CHF, this is allowed provided you own the actual number of US$'s. However you cannot sell CHF for US$'s as you do not own any CHF.

Also, trading on margin is strictly not allowed. You cannot buy/sell in a greater amount that what you have. That is why, even in valid commercial transactions, if you have only $500, you can only trade $500, ie a leverage of 1:1. Anything trading leverage of greater than 1 is strictly forbidden.

ALL swap points are Haraam, whether it's receiving or paying.

All Gambling is strictly Haraam.

Lying about past performances is definitely a sin and any earnings based upon lies and gambling is strictly not allowed and is Haraam. (so all signal providers who lie about their past - be aware)

Thoughts people.

Timer3

Biedrs kopš Sep 27, 2017  5 ieraksti Timer3 Oct 04 2017 at 07:22
gbpusdg posted:
Islam and trading:

Aim here is to discuss the legitmacy of 'trading' forex or any other instrument for short-term gain.

My understanding is as below:


You just said the wrong words, 'my understanding'. Some other Muslim may think differently. One of the riches Muslims is Prince Alwalead. (Spelling probably wrong). He holds a massive stock portfolio including a big stake in Citi Bank. He seems to have no problem with it.

gbpusdg

Biedrs kopš Sep 19, 2017  35 ieraksti gbpusdg Oct 05 2017 at 07:10
Timer3 posted:
gbpusdg posted:
Islam and trading:

Aim here is to discuss the legitmacy of 'trading' forex or any other instrument for short-term gain.

My understanding is as below:


You just said the wrong words, 'my understanding'. Some other Muslim may think differently. One of the riches Muslims is Prince Alwalead. (Spelling probably wrong). He holds a massive stock portfolio including a big stake in Citi Bank. He seems to have no problem with it.


Timer3 - Thank you for replying :-)

However, please read what I wrote carefully in particular:

'Islam is about RESPONSIBLE OWNERSHIP and most short-term traders do not care about responsible ownership, they are just worried about short-term price movements.'

So holding stocks for the LONG-TERM, provided they do not conflict with ethical/moral principles is PERFECTLY ACCEPTABLE. Prince Alwalead is NOT contravening the rules as he is a long-term holder and he is buying in to a real business which is perfectly acceptable within the rules of Islam.


I was specifically referring to SHORT-TERM DAY TRADING, in particular forex trading, where there is no commercial objective except to speculate on short-term price movement. The transaction has no real World purpose like FX for holidays, paying for foreign goods, foreign liabilities. The sole objective is short-term speculation which is akin to gambling.









Timer3

Biedrs kopš Sep 27, 2017  5 ieraksti Timer3 Oct 06 2017 at 09:25
So now the question is what is the time frame for the difference between short term and long term. Is it 6 months? Is it 1 month? Is it 12 months? Where does the Quran say the appropriate time between short and long term.

Whether you trade long term or short term, you are risking money to make money. You are not producing anything. All freely traded markets is simply money changing hands from the losers to the winners regardless of how long you take to do it.

gbpusdg

Biedrs kopš Sep 19, 2017  35 ieraksti gbpusdg Oct 08 2017 at 06:31
Timer3 posted:
So now the question is what is the time frame for the difference between short term and long term. Is it 6 months? Is it 1 month? Is it 12 months? Where does the Quran say the appropriate time between short and long term.

Whether you trade long term or short term, you are risking money to make money. You are not producing anything. All freely traded markets is simply money changing hands from the losers to the winners regardless of how long you take to do it.



Hello Timer3 - Thank you for taking time to reply :-)

Responsible ownership is the key and this is what issue is.

So when you trade, are you actually looking to take delivery and hold on to the asset?

Most futures/currency/day trading contracts that are traded, the holder has zero intention of taking delivery. Also you cannot short something you do not own.

When you buy stocks, you are buying into the business (you become a stakeholder). You probably take an interest in the underlying business and you hope it does well. When you simply 'Day Trade', you have zero interest in the underlying business, all you care about is short-term price movement.

All investments, have a inherent risk, whether its setting up a real business or buying stocks in a already established business. However the difference lies in that when you buy for medium/long-term, you are interested in the underlying business, it's products, it's management (prime example being Warren Buffet would be the ideal example and which is 100% acceptable).

None of the above applies to day traders especially when they trade short or trade on margin (both of which are not allowed as far as I have read).






SAFXEater

Biedrs kopš Oct 10, 2017  10 ieraksti SAFXEater Oct 10 2017 at 14:44
Just make sure you use an Islamic trading account and you should be fine

gbpusdg

Biedrs kopš Sep 19, 2017  35 ieraksti gbpusdg Oct 11 2017 at 11:21
SAFXEater posted:
Just make sure you use an Islamic trading account and you should be fine


Hi SAFXEater,

An Islamic account takes care of the carry (interest) element, HOWEVER, it does not take in to account the below:

1 - Trading on Margin (not allowed in Islam)
2 - Going Short (not allowed in Islam)
3 - Short-term (day) trading (Not considered responsible ownership - no intention to take delivery).


So as above three points - How do you deal with those?






johnnathan

Biedrs kopš Sep 12, 2017  9 ieraksti johnnathan Oct 11 2017 at 11:22
Islamic account are the accounts which are commission free and swap free

BaldoN

Biedrs kopš Feb 12, 2016  487 ieraksti Baldo (BaldoN) Oct 11 2017 at 14:48 (labots Oct 11 2017 at 14:49 )
This would mean commissions charges will be added in the spread + some other worsening trading conditions to compensate the swap / financial charges that will be applied from the banks / LPs - because the last does not have understanding whether the account is regular or Islamic or whatever. They just care how much they will make!
:)

BaldoN

Biedrs kopš Feb 12, 2016  487 ieraksti Baldo (BaldoN) Oct 11 2017 at 14:50 (labots Oct 11 2017 at 14:51 )
:)

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