Forex trading has become a global phenomenon, with traders from all walks of life trying their hand at the extremely risky, volatile, and exciting FX market. It is also one of the few financial products that transcend geographical boundaries and language barriers since the decentralized Forex market is open to all investors, unlike country-specific stock and other capital markets.
Of course, with this level of global exposure that FX and CFD enjoy, it is only natural for traders of all beliefs to participate in the market. However, a few trading aspects may not be entirely compatible with certain religious beliefs, which is why we have developed this complete guide to Forex Islamic accounts. We also recommend the best Forex brokers offering Islamic accounts, the nuances of Islamic Forex trading, and how to open an Islamic Forex account through this detailed guide!
Best Forex Brokers for Islamic Account
| Broker | Deposit* | Leverage* | Platforms | Assets | Regulation | Visit |
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| XM | Min. Deposit: $5 | Max. Leverage: 1:1000 |
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Visit XM XM review |
| XTB | Min. Deposit: - | Max. Leverage: 1:500 |
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Visit XTB XTB review |
| Eightcap | Min. Deposit: $100 | Max. Leverage: 1:500 |
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Visit Eightcap Coming soon |
| AvaTrade | Min. Deposit: $200 | Max. Leverage: 1:400 |
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Visit AvaTrade AvaTrade review |
| eToro | Min. Deposit: $1000 | Max. Leverage: 1:30 |
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Visit eToro 61% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. eToro review |
| Forex.com | Min. Deposit: - | Max. Leverage: 1:300 |
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Visit Forex.com Forex.com review |
| Pepperstone | Min. Deposit: $200 | Max. Leverage: 1:500 |
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Visit Pepperstone Pepperstone review |
| Bubinga | Min. Deposit: $5 | Max. Leverage: - |
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Visit Bubinga Coming soon |
Is Islamic Forex Trading a Religious Prerequisite?
First, it is imperative to understand that Forex Islamic accounts only apply to traders who follow Islamic religious beliefs and ideals. Muslim traders worldwide may have varying religious beliefs owing to their ancestral ideologies. Still, one thing that remains common among most Islamic traders is that they are not allowed to engage with any investment or financial product that involves the concept of interest payments. In short, Islamic traders are not allowed to pay or receive interest or other similar monetary benefits. As a result, Forex Islamic accounts are only offered to Muslim traders unless you can prove to the broker that you are an ardent follower of such ideals.
What Is Islamic Account in Forex Trading?
Before we start explaining what is Islamic account in Forex trading, we must first explain why there is a need for a Sharia-compliant trading platform in the first place. We briefly mentioned above that any form of interest payment or allied financial transactions is forbidden for people following Islamic ideals and beliefs. Sharia compliance is an integral aspect of Islamic finance, especially in Muslim-majority regions such as the Middle East and Asia. There are numerous laws in the Muslim community governing what is acceptable in terms of money and its purpose in a transaction. Millions of investors follow numerous interpretations relevant to their culture and demographic.
FX and CFD trading involves many different transaction costs that might not be immediately visible to beginner traders or an inexperienced eye. An FX transaction typically consists of a bid/ask price of a currency pair, the spread between the bid/ask price, the commissions, SWAP, and any other transaction costs that the broker might charge. However, from an Islamic Forex trading perspective, the most important cost aspect is the SWAP fee, an overnight funding fee paid to a broker for holding positions overnight.
The SWAP fee is essentially interest paid/received for buying/selling one currency against another and holding them beyond the market close on any particular trading day. SWAP fees are calculated as the difference between the interest rates of the base and quote currencies, which is why a SWAP can be either positive or negative. In the case of a positive SWAP, interest is paid by the broker to the trader, while in the case of a negative SWAP, the trader has to pay interest to the broker for holding the positions open overnight. Essentially, the higher the rate difference between the interest rates of the currency pairs, the higher the SWAP.
The SWAP fee does not face much opposition among regular FX swing traders, who are known to pay up to 10% of their transaction size on long-term trades. It is considered part and parcel of the market and such fees are not restricted to the FX market alone. SWAP interest payments are also found in stocks, CFDs, and other financial instruments. However, while interest payments are considered normal and completely accepted in numerous parts of the globe, Muslim traders may find such a fee to directly contradict their religious beliefs.
Forex brokers offering Islamic accounts understand the predicaments of such traders and have since started offering a Sharia-compliant SWAP-free service that is completely devoid of any interest payments. There are no overnight funding fees, nor do the brokers charge any other form of interest or charges related to interest payments.
As a result, the accounts fully conform to Muslim religious beliefs, thereby opening up the market to this segment of retail traders. However, a cost is still involved in holding overnight positions, which brokers pass on to traders through increased spreads and commissions. Some brokers may also charge an additional fixed transaction fee and order execution, which can ramp up trading costs.
Differences between Regular and Islamic Accounts
There are indeed quite a few noticeable differences between regular and SWAP-free trading accounts. Let us briefly take a look at each one to understand how the best Forex brokers for Islamic accounts can substantially impact your trading performance.
Trading Protocol
Regular brokerages offer a choice of trading protocols, including ECN/STP for direct market access trading, but it isn’t easy to find good Forex brokers offering Islamic accounts. Most mainstream companies usually restrict the Islamic Forex trading option to a standard market maker account since ECN/STP/NDD protocols retrieve prices directly from the liquidity pool. It may be difficult to mark up the spread to account for the loss in SWAP fees.
Costs
SWAP fees are interest payments that can be positive or negative. However, SWAP-free accounts eliminate this fee, which is then added back as trading costs. This means that Muslim traders will have to pay more spread and commission on overnight trades compared to regular accounts.
Trading Strategies
Not all brokers restrict trade strategies on SWAP-free accounts, but some do. That is why it is imperative to choose the best Forex brokers for Islamic accounts, as they will offer the same environment for both regular and Muslim traders.
Bonuses and Promotions
SWAP-free accounts usually don’t provide any bonuses and promotions, even if the broker offers such programs for other clients. Some bonuses and promotions may not be Sharia-compliant; hence, it is safer for the broker and trader to avoid any form of promotion.
Trading Platforms
Brokers may sometimes develop a standalone platform exclusively for their SWAP-free clients since it involves adding a markup to the trading costs while also eliminating SWAP for overnight trades. However, popular platforms such as MetaTrader and cTrader support SWAP-free trading.
Deposit/Withdrawal Policies
Brokers may reserve their right to implement different payment policies for deposits and withdrawals to differentiate the services between regular and SWAP-free accounts.
Benefits of Forex Islamic Accounts for Muslim Traders
Below are some of the benefits that you receive when you open an Islamic Forex account:
- No overnight funding fee means you can hold trades as long as you want without worrying about paying interest.
- The trading costs are known beforehand, which is not the case with SWAP since SWAP rates keep changing.
- Muslim traders can be assured that they are engaging in fully Sharia-compliant trading that does not violate or infringe on their religious beliefs.
- By choosing the best Forex brokers for Islamic accounts, you get access to top-notch trading platforms, accompanied by excellent trading tools and an impressive services portfolio.
There are certain disadvantages of a SWAP-free account that you should know about before you open a Forex Islamic account:
- Even though the broker eliminates SWAPs, the overnight funding costs are added back to the account in the form of administrative fees or transaction costs. Therefore, it can be more expensive than SWAP.
- Only Muslim traders and those following Islamic religious beliefs are eligible to sign up for a SWAP-free account.
- The trading conditions may be restricted, including limitations on leverage, lot sizes, and other trading parameters.
- Finding an ECN/STP/NDD brokerage that offers a SWAP-free option is very difficult.
Steps, Procedures and Requirements to Open an Islamic Forex Account
Before you sign up with any company for a SWAP-free account, you must first get in touch with the broker and verify whether you are eligible for an Islamic account. This can be done by simply sharing your personal identifying documents with the broker and providing proof that you follow Muslim ideology. Once you verify that you can sign up, proceed to the registration page and choose the SWAP-free or Islamic Account option.
If you are unable to find such an option, the broker’s customer service representatives may be able to assist you. In some cases, the broker may ask you to sign up for a regular trade account, and then the broker will convert it into a SWAP-free account after you submit all the relevant documents proving your credentials. You should receive an email once your account is set up, after which you can deposit funds and start trading.
There are FX brokers out there that allow non-Muslims to open an Islamic account, but only a few companies offer such an option. In such cases, all they require is a disclaimer and consent from the trader that clearly states the trader’s reason and intent behind choosing this option instead of a regular account. However, in our experience, such companies are few and far between, as most demand some form of evidence to support a trader’s Islamic beliefs.
Stay Safe by Choosing the Best Forex Brokers for an Islamic Account
It is no wonder that Muslim traders are at a higher risk of scams and financial abuse from fraudulent companies since these traders have specific requirements. Deceitful companies often prey on this community by promising Sharia-compliant accounts when they might be in the market to steal people’s money. As a trader, your priority should be to safeguard your capital.
Only trade with regulated or trusted brokers; use our website and its numerous articles to protect yourself from fraudulent operators. We have compiled a great list of the best Forex brokers for Islamic accounts, so you can be assured of the best FX services and guaranteed safety of your funds. Choosing a Forex Islamic account is the first step in your trading career, and making the right calls will ensure that you have a lucrative and safe trading journey.