Binary option identification islamic account


However, dig a little deeper and you might wonder is forex trading actually haram? But in reality there remain several issues. To make substantial intraday profits from tiny price movements you need to invest large sums of money, thousands, if not hundreds of thousands of pounds. So, to alleviate this problem forex brokers offer you leverage.

You can now take much larger positions and increase your profit. However, this is in effect a loan. In Islam, it is permissible to borrow from someone for the purposes of investing to make a profit and then return that loan interest-free to the creditor. However, with forex brokers, they are lending you the money for the sole purpose of taking a commission. Effectively they will make a return on every trade. Many scholars consider this a form of interest, making trading forex haram.

Fortunately, Islamic forex brokers have responded by providing day traders with an alternative. To remain profitable they instead charge increased commissions in spot forex trades. Whilst some suggest this is simply a disguised interest component, many scholars are content with this new method of facilitating trades. With the interest element out the way, the next issue relates to the exchange itself.

This shows the prophet Mohammed obviously had in mind commodities would be exchanged between two parties, as a natural part of commerce. Many argue the deal is made between the broker and trader, which would qualify under the definition of two different parties, and therefore halal. So, trades must be entered and exited almost immediately, which with forex traders they usually are.

This could perhaps mean though that non-market trades such as stop and limit orders are in fact haram. You are merely speculating whether the value of the currency will increase or decrease, so is this halal? This is difficult to answer definitively and it may be something you want to seek specific religious advice on. Many are in agreement with several factors surrounding forex that may answer the question. Islam recognises the need for humans to want to improve their lives, including their financial situation.

We all must consider implications when confronted with choices and use intelligence to respond in such situations. So, whilst we know gambling is strictly haram, you can find halal forex brokers who have made every effort to keep any activities strictly within the confines of Islamic law. Unlike other forms of trading, binary options offer more straightforward trades then a lot of other instruments, such as stocks and forex.

The option will either pay out a fixed amount of compensation if the option expires in the money, or it will pay out nothing if the option expires out of the money. If the trader has little knowledge of what and how to trade, then to trade binaries would be a form of gambling, and not halal. On top of that, because each contract must have a winner and loser, this is arguably not halal. For not every party can profit or extract value from the trade.

Having said that, there is also a growing school of thought that only the individual trader can know whether trading binaries is halal or not. If you understand the complexities of the trade then perhaps you are not gambling. It is clear that halal online trading will depend partly on your actions and partly on the broker you opt for. Whatever your online Islamic investment, be it stocks, forex, or options, for a broker to claim they offer accounts based on Islamic principles, they need to meet the following criteria:.

There will always be a divide in opinion as to whether day trading is halal or haram. It must also be noted that despite in-depth research into numerous sources, this page is not trying to offer readers religious advice. This is a principle which is integral to the Muslim belief system. It is a reflection of the religious belief that giving should be done without expecting reward.

In response to this the brokers are offering accounts which operate in much the same way as the traditional accounts but which are specifically designed to avoid the scenario of interest. This is often tied in with closing trades before the end of the day or pausing them overnight.

If you wish to utilize an Islamic binary options account you will need to understand that a halal account is one which is allowable under the Muslim guidelines, whilst a haram account is forbidden. A Halal account needs to operate on an instant basis; there can never be a delay which provides the opportunity to earn interest. Equally, any profit generated must be immediately placed into the client account to prevent it earning interest. It is also important to ensure that all payments are completed in one transaction and no interest has been earned or charge by any of the parties involved in the transaction.

It is also important to recognize that a halal binary options broker will not allow you to bet or take chances with your funds; this is also forbidden by Islamic law. It is essential to understand the market you are speculating in and trade with caution at all times. This means using self-control, utilizing all possible price charts and economic information and observing other traders. It does not mean undertaking risk free trades which are likely to make you take a chance.

You must also be prepared to share your trading information with your family and other interested parties. Trying to trade when you are emotionally disturbed or simply to increase your wealth is strictly forbidden by Muslim law. Equally not informing your family of your trades can be seen as a neglection of your duties under Islamic law. This also means you should not trade if you are addicted or if you are simply trading in an attempt to recover initial losses.

It goes without saying that you can never borrow funds to start trading. This is something which should apply to all traders not just those operating under Muslim law. There has been a gradual increase in the number of brokers offering Islamic binary options accounts. In general these accounts are created to run alongside the traditional style account and offer access to all the same features; except for anything which goes against Muslim law.

To qualify as a halal account it is essential for an approved broker to ensure the accounts are Sharia compliant and all charges and earnings are declared openly to those who need to see them. The trades must all be closed at midnight to ensure they are compliant with the interest regulations and the same assets should be available to Islamic traders as to any other traders.

The ability to trade with these special accounts means that many thousands of Muslims are able to trade in binary options where they were not able to before. Not all brokers offer an Islamic binary options trading account yet.

However, should you locate one that does it is still essential to perform all the necessary checks. These include reviewing their offerings and statistics as well as checking what other people have to say about them.

When researching an appropriate broker it is essential not to be afraid to ask questions and move on if you have any doubts. It is possible to find a good trading platform which complies with Islamic law; in the same way that the Islamic bank has developed and provided a viable option for people of other faiths.