Halal Trading

With Islam the second-largest religion in the UK, investors are increasingly interested in whether online trading is Halal or Haram. To answer that question, we explain Halal trading principles across forex, stocks, CFDs and cryptos.

Please note this site is not a religious authority on the subject of Islamic trading. To be certain your trading activities are Halal, we recommend consulting with a religious authority that can consider individual circumstances.

Halal Brokers & Trading Accounts

Pepperstone

CFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.1% of retail investor accounts lose money when trading CFDs.
XTB

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money
CMC Markets

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

The 10 Best Halal Brokers in the UK

What Is Halal Trading?

To operate within the parameters of Islamic law, four principles need to be followed:

You must not pay or receive interest (Riba)
Transactions must be immediate (‘hand to hand’)
You must not gamble (Gharar)
Dispensation of risk and reward

1. Riba

Whether trading currencies, stocks or cryptos, many brokers offer leverage. This is essentially a loan used by traders to increase position sizes and associated profits. For example, you deposit £10 and your broker loans you 30x that so you can trade with £300. However, many scholars consider margin trading Haram as brokers make a profit on the borrowed amount, which is considered a form of interest.

In response, many Islamic-friendly brokers now offer interest-free (swap-free) accounts. Instead of charging overnight interest on loans, brokers increase commission charges. While still debated in some academic circles, for many, this alleviates Riba concerns.

2. Hand To Hand

Another obstacle when it comes to answering whether investing in the financial markets is Halal or Haram is the question of hand to hand exchanges. Trading is considered Halal if exchanges are settled immediately and face to face. This is in line with the daily need to exchange commodities, such as grain, for thousands of years. Of course, technology means that exchanges can now be made online. But does that make trading forex, for example, Haram?

Many scholars are content that if agreements are made solely between a broker and trader and executed in the same session, then the hand to hand principle is satisfied. Intraday trading XAUUSD, for example, could be permissible. With that said, long-term investing using binary options with expiries in the future may be considered Halal, as they are not settled immediately.

3. Gambling

It is generally accepted that gambling is Haram. However, some scholars are comfortable with trading currency, stocks or cryptos if the objective is to generate profits and investments are grounded in analysis versus guesswork. Rather than wild speculation, a careful and considered approach to online day trading may be considered Halal. With this in mind, it’s important to open an account with a broker that offers comprehensive market analysis tools.

4. Risk & Reward

Another consideration is the risk and reward of trades. In particular, Islamic laws and principles highlight the issue of shared risk. This issue is governed by principles such as Bai al inah (sale and repurchase), Bai muajjjal (credit sale), Bai salam, Mudarabah (profit sharing), and Bai bithaman ajil (sale with deferred payment).

Fortunately, if we take forex trading as an example, we can see that if the market moves in your favour, you may see a profit. However, if exchange rates move against you, then your investment may lose money. In effect, you are sharing both risk and reward.

Islamic Accounts

Islamic trading accounts are available at many top brokers. Carefully adapted, these online trading accounts aim to comply with Islamic law. Firstly, they aim to remove interest charges for positions held open overnight. Additionally, they remove any interest charges which may conflict with Riba. Finally, Halal trading accounts offer immediate executions. By removing settlement delays, they endeavour to comply with the hand to hand principle.

Islamic account opening requirements are similar to standard trading accounts and may require proof identity and residency.

Pros Of Halal Trading

May provide access to the financial markets without breaching religious reliefs
Trading on forex, stocks and cryptos is available without high swap rates and rollover charges
Islamic traders can invest on the same leading online trading platforms offered with standard accounts

Cons Of Halal Trading

Traders may encounter increased commissions and wider spreads to compensate for zero swap rates
Some trading instruments, such as futures, may not comply with Islamic investing principles

Is Online Trading Halal Or Haram?

Investing in the financial markets often leads to debate within Islamic trading circles. Many of the best Halal brokers today offer what they consider to be Islamic friendly accounts, platforms and trading apps. With that said, it’s always worth doing your own research and consulting a religious authority for guidance on individual circumstances.

This article does not provide religious guidance. Instead, we have collated multiple viewpoints for our readers’ consideration.

FAQ

Is Stock Trading Halal Or Haram?

Trading stocks and shares may be permissible under Islamic law. This is because you are owning part of the business. The key concern is whether the activities of that company comply with Islamic law. For example, investing in companies dealing in alcohol, tobacco, gambling, insurance, and nightclubs would be considered Haram. Alternatively, firms operating in shipping, clothing, real estate and medical supplies are considered ‘clean’ companies.

Is Trading Futures & Options Halal Or Haram?

Futures contracts are typically considered Haram as trades are deferred and not executed immediately. Transactions may not comply with Islamic finance principles as they can involve interest, uncertainty, gambling, and speculation. Similarly, the speculative nature of options trading with no shared risk or reward is considered Haram in many circles. With that said, some believe that if accounts remove interest charges and traders take investing seriously, then it may be Halal.

Is Trading Commodities Halal Or Haram?

Many Islamic forums agree commodity trading is Halal if price and quantity are identical i.e. of equal weight. If commodity classes differ such as trading gold for silver, payment must be made hand to hand to comply with Islamic law. Extended periods between contract and delivery may breach Riba and be considered Haram.

Is Forex Trading Halal?

Forex trading is generally considered to be Halal if certain principles are followed. These include the immediate settlement of transactions, lending itself to intraday trading strategies, as well as investing without interest payments and taking a considered approach to the market rather than speculative gambling. Consult your religious authority if you have additional questions.

Is Trading Bitcoin Halal Or Haram?

Scholars are undecided on whether investing in cryptos such as Bitcoin is Halal or Haram. Many feel the speculative gambling nature makes Bitcoin trading Haram. Others believe that with the right account conditions, such as zero swaps and intraday settlements, investing in the digital coin may be Halal.

Is Online Trading Halal In Islam?

Trading may be Halal if Islamic finance principles are followed. Many good brokers offer Islamic accounts that respect religious values when investing. With that said, you should speak to your religious leader if you have any questions or require further guidance.