Our Guide for Trading Using Islamic Accounts

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What is an Islamic Account?

Islamic trading accounts are a unique type of investment account that has a number of differences from standard investment and trading accounts. These accounts exist because Sharia law forbids the earning of interest on any money in a banking or investment account. Because of this, owners of Islamic accounts earn no interest on their deposit funds and receive no rollover points on any position that has been open for longer than 24 hours.

Another difference with Islamic accounts as prescribed by Sharia law is that all trades and transaction costs must occur immediately. Islamic trading accounts are designed to support all of the business and investment rulings made under Islamic law. One of the brokers which offers an Islamic trading account is IQ Option.

Users of Islamic Accounts

Islamic trading accounts are designed for individuals who live according to Sharia law, which prohibits “Riba.” “Riba” is generally defined as making money from money, and the most common occurrence of this in forex trading is the earning of interest on certain trades or account balances. Almost all regular Forex trading accounts charge or earn interest, making them unusable under Sharia law. Beyond this, Islam also prohibits the practice of “Gharar,” which is usually translated as “gambling.” Still, it can more generally refer to the uncertainty and inability to predict future price movements involved in Forex trading.

Six activities prohibited in Islamic accounts

Six common Forex transactions are generally banned in Islamic trading accounts which are:

  • Loans – money given to a customer on preset terms of repayment with interest.
  • Trading on margin – often viewed as little more than a modified version of a loan.
  • Short Selling – selling an asset the trader does not directly own for profit.
  • Riba – interest that is earned by the account holder; making money from money.
  • Pledge – a signed contract that puts time limits on the repayment of a loan with special permissions relating to the selling and percentage of margin on credit.
  • Forward sales – agreeing to use today’s price for a future purchase or sale of an asset.

Opening an Islamic account

Every day, there are a growing number of brokers who offer Islamic Forex trading accounts. In fact, the Islamic banking sector has grown an average of more than 19% per year, making Islamic Forex accounts more available and more easily opened than ever before. You can find forex brokers allowing Islamic accounts here.

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Stefan Grasic (Dipl.-Jur) is the World Wide Director of research for Buisness24-7 and has considerable experience in the financial and investment niche, but also enjoys writing articles for the general readership. Stefan is an active Crypto, Forex and general investment researcher advising blockchain companies at their start up level. He keeps fit by mountain biking, surfing, skiing and lots of other adrenaline sports.