Today the foreign exchange, or Forex, is the largest trade market in the world. Practicing Muslims, however, are usually unable to participate because their religion does not allow for the payment of interest. Now, though, Muslims can trade on the Forex through Islamic Forex accounts. In accordance with Islamic law, Islamic Forex accounts do not receive or pay interest.
When a Forex trader leaves a position open overnight, he or she will usually pay interest to the broker. Most of the time, a trader receives interest on the currency being purchased and pays interest on the currency being sold. The interest rate will be determined by the exact currencies being traded and the brokering business that is being used.
But rather than collecting interest, most Forex companies have a routine known as position swapping.
In this process, the currencies will be bought and sold at five in the evening, only to be sold and bought back the next day. You can make a small profit this way if the currency you are buying has a higher interest rate than the one that you are selling.
Islamic Forex accounts are usually controlled by brokers who will recommend trades for you to make.
If you don't want to be involved in the daily management of the account, your broker will send you updates on the account's status. While recommending options to you, your broker may also explain to you how Forex trading works. If you're an expert trader though, you can handle everything on your own.
In Islamic Forex account, the trader will not receive or pay interest even if the position is kept open for days.
Many people use this type of account, and not all of them are Muslim. For many traders, it's just easier to not have to worry about interest when trading on the Forex.
Be aware, though, that not having to worry about interest can come with a price. Depending on the broker, there may be higher spreads or more fees with an Islamic account. But not all companies do this; some offer swap free accounts for no extra charge.
You'll have many institutions to choose from if you decide you want an Islamic account, so you'll want to study your options and pick the right one. To open an account with some firms, you may need to meet their minimum investment requirement. Other firms may allow you to begin with a smaller investment. Above all else, you need to be comfortable with your investment decision.
When a Forex trader leaves a position open overnight, he or she will usually pay interest to the broker. Most of the time, a trader receives interest on the currency being purchased and pays interest on the currency being sold. The interest rate will be determined by the exact currencies being traded and the brokering business that is being used.
But rather than collecting interest, most Forex companies have a routine known as position swapping.
In this process, the currencies will be bought and sold at five in the evening, only to be sold and bought back the next day. You can make a small profit this way if the currency you are buying has a higher interest rate than the one that you are selling.
Islamic Forex accounts are usually controlled by brokers who will recommend trades for you to make.
If you don't want to be involved in the daily management of the account, your broker will send you updates on the account's status. While recommending options to you, your broker may also explain to you how Forex trading works. If you're an expert trader though, you can handle everything on your own.
In Islamic Forex account, the trader will not receive or pay interest even if the position is kept open for days.
Many people use this type of account, and not all of them are Muslim. For many traders, it's just easier to not have to worry about interest when trading on the Forex.
Be aware, though, that not having to worry about interest can come with a price. Depending on the broker, there may be higher spreads or more fees with an Islamic account. But not all companies do this; some offer swap free accounts for no extra charge.
You'll have many institutions to choose from if you decide you want an Islamic account, so you'll want to study your options and pick the right one. To open an account with some firms, you may need to meet their minimum investment requirement. Other firms may allow you to begin with a smaller investment. Above all else, you need to be comfortable with your investment decision.
Islamic Accounts in the Forex Market
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