Islamic accounts

Islamic accounts

What is Islamic Accounts?

An Islamic account is a halal trading account that is offered to customers who respect the Quran and want to invest in the stock market, following the principles of the Islamic faith.

Islamic trading accounts, also known as swap-free accounts, differ slightly from regular Forex accounts. Since the Islamic Sharia prohibits the accumulation of interest, traders with Islamic accounts do not pay or receive interest rates. In addition, transactions in Islamic accounts must be executed immediately, so currencies must be immediately transferred from one account to another, and transaction costs must also be paid at the same time.

In Europe, this type of trading account is not necessarily promoted by brokers, so sometimes Islamic accounts are less profitable for them, and the number of customers who request them is very limited.


Islamic Trading Account - Principles of Trading

Islamic accounts have four basic principles:

  • No interest rates of any kindĸ (RIBA)
  • Immediate execution of trade orders
  • Ban on gambling
  • Separation of rice and profit

These four principles do not always fit into Western banking and trading traditions, and special trading accounts, commonly referred to as “Islamic accounts,” have been created to comply with Islamic principles.

These accounts are offered to clients who wish to trade in Fores without the need to separate their investment activities from their religious principles.

In general, these accounts are very similar to traditional trading accounts, only a few specific elements have been adapted to comply with fundamental Islamic principles. 


How to open an Islamic account?

To open an Islamic account, Muslim clients must register and open a JFSBrokers account, as well as provide the necessary documents to open a trading account.

Once you receive confirmation that your Islamic account has been opened, you can make your first deposit using your preferred payment method and start trading on the exchange. Opening an Islamic trading account is now easier than ever.

You can request a withdrawal of funds through your online account at any time. 

If you wish, you can practice trading with an Islamic account using a demo trading account without rice. You will have access to ĸ real market conditions, but with virtual funds. Plus it's free!


Islamic trading account - Commissions

One of the features of trading on an Islamic account is that it does not allow the use of swaps, ĸаĸ in the case of all other traditional trading accounts. A swap is the interest paid or received by a trader when he holds an open position overnight, which is a prohibition against Muslims wishing to trade in the Forex market.

One Islamic account excludes swaps so that Muslims can trade on the stock exchange or Forex. But then what commissions do traders pay?

All Muslim clients who use an Islamic merchant account pay margin, commission and administration fees, which are not Riba Haram. 


Fores Haram Islamic Account or Halal?

Due to the size of the Muslim world and the development of trading, the issue of the stock market in Islam is increasingly discussed. This section will look at many points of view and sources to answer the question of whether trade is permissible or sinful.

We will analyze the Forex and stock markets in detail and try to give advice on how to comply with the rules of halal trading, and also consider what tools can be used to trade on an Islamic account.

So, is trading in Forex and the stock market halal or haram?

This question is often raised by Muslim investors who want to invest in financial markets. In fact, Islam allows you to search for methods to improve your well-being, but doubts about the stock market in Islam persist. 


Islamic account and swaps

If you turn to the question of the prohibition on the payment and receipt of interest, the situation becomes more complicated. Typically, when an investor maintains portfolio positions after the close of the trading session (after 22:00 for the futures markets) or after midnight (for Forex and commodities), the broker will charge a commission (swap).

This interest rate is linked to the broker providing you with indirect credit through the leverage. And, аĸ and any credit, it is quite normal and beneficial for the broker-lender. Therefore, a standard trading account is haram (ban), because its function includes the payment of interest (swap).

In fact, Islam allows you to borrow money from someone in order to invest for a profit, and then pay that interest-free loan to the lender.

To make a profit, the broker instead charges a commission, which some may regard as gross interest, but many favor this method of facilitating trade. Therefore, a swap-free Islamic trading account crosses the riba barrier. 


Islamic account - Kaĸ carried out trade

In addition to the point with interest, there is also a nuance that concerns the exchange itself. Trade in Islam is permitted if it is conducted "ruĸa ob ruĸu".

In the past, most transactions would have been made face-to-face, but with the development of electronic commerce, this moment was practically excluded. What does "ruĸa ob ruĸu" trade mean? Many argue that if an agreement is concluded between a broker and a trader (that is, with the participation of two different parties), it is halal. Many also believe that the physical exchange should take place during the same “session” when the counter was struck.

Therefore, transactions must be executed immediately, which usually happens to traders in the Forex market, where orders are executed in a few seconds or less.

Therefore, binary options are considered "haram" in Islamic trading. 


Islamic Accounts - Rice and Profit in Trade

One of the biggest challenges is the rice trade element. The element that is governed by these principles is ĸaĸ Bai al inah (sale and return), Bai salam, Mudarabah (profit sharing), Bai muajjjal (sale on credit), Bai bithaman ajil (sale with deferred payment), Murabahah and Musawamah.

When you invest, you are investing in an asset. If the value of this asset increases, you make a profit. On the other hand, if an asset loses its value, you are losing money. As a result, you share the profit and the risks of a successful business. Hence, from this point of view, trade and Islam are completely compatible. 


Islamic account and purchase of transactions

It is generally accepted that the attainment of an accie is not haram. This is because you are simply the holder of a portion of the company's shares. However, you must ensure that the activities of your chosen company are conducted in accordance with the principles of Islam.

For example, such companies, ĸаĸ Pernod Ricard (alcohol) and Francaise des Jeux (gambling), are not considered halal.

Halal companies can be divided into two categories:

  • Permitted operations include: sea transport, manufacturing, clothing, medical equipment, real estate, furniture, consumables, and so on.
  • Agents that are not allowed for Muslim trade are the auctions of any companies that are associated with alcohol, gambling, riba ban and so on.


If a company is engaged in various activities, and only part of the services and goods it provides are non-halal, you can still invest in this company. It is assumed that you are simply reporting the percentage of the profits generated from the non-halal part of the company's sales.

So, if 10% of the company's profits come from the production or sale of alcohol, you will donate 10% of your profits to charity. 


Islamic accounts - What instruments are available for trading

With this broker, JFSBrokers, you will have access to the main markets: Forex, CFDs on indices (Contracts for Difference), CFDs on shares, CFDs on commodities and money stocks, as well as to more rare markets, such as CFDs on bonds and ETFs (exchange-traded funds).

If we are talking about Forex and stock trading, then a trader who wants to follow the rules of Sharia and at the same time trade on Forex or the stock market will certainly wonder what exactly he can trade. Practically all instruments are suitable for Muslims, except for bonds and futures.

At the time of issuance of bonds, the fixed interest rate is pegged to the duration of each bond. If the value of a bond can vary depending on supply and demand in the market, then the return on investment, calculated as a percentage of the initial value of the bond, is fixed and does not change. Therefore, bonds can be considered haraam because they are based on an interest rate, even if you are investing through CFDs rather than receiving interest, it is the interest rate value that underlies the environment. Therefore, investing in this asset would be like using an interest rate.

Futures contracts are also considered haraam due to the delayed nature of the exchange of goods after the “signing” of the sales contract. Execution is not instantaneous. They are quoted against the dollar, so their fluctuations depend only on changes in supply and demand. They are never based on interest rates, either directly or indirectly, and allow trading in cryptocurrencies to be considered a legal instrument for Muslims. 

Raw materials are also halal, but the commodity asset is metals or agricultural products.


Trading strategies for those whose broker does not provide an Islamic account

Day trading is one of three types of trading using salping and swing trading. This type of trading involves opening positions that will be closed during trading sessions, which means that your positions will be closed until midnight in the Forex market or before the close of stock and futures markets.

The interest of this type of trading lies in the fact that even if your broker does not have an Islamic account, if the positions you have opened are closed before midnight or before the markets close, you will not have to pay a swap and, therefore, start with interest. This way, even if your trading account is not Islamic, but you are trading daytime, you will not be charged interest. Therefore, an Islamic account is not required for day trading.

What, then, is the benefit of having an Islamic trading account? Sometimes a trader will open a position in the morning with the intention of closing it at the end of the day. However, it may happen that at the end of the day the position is in positive territory, and the trader expects the movement to continue.

In this case, it may be advisable for him not to close his position and keep it in the portfolio in order to get more profit. If a trader has an Islamic account, he can take full advantage of this opportunity, however, if the trader has a standard account, he must discard this potential benefit in order to respect the principles of trading in Islam. 


Islamic Account - Benefits

The main difference between Islamic and regular accounts is that there are no swap charges. This can be a very important benefit, so you can take long-term positions without risking lowering your benefits from swap fees. The second big advantage is that a trader will be able to open positions in currency pairs, in which the cost of swaps is usually very high (especially in eĸsotic pairs).


Islamic Account - Disadvantages

The lack of a swap can also harm the Fores trader, as he will not be able to benefit from currency fluctuations and conduct trading strategies. Often, in order to make a profit without interest, a broker who does not use swaps will charge a financial administration fee, as many Muslim baths do.