With the rising demand for Forex trading, there are firms that introduce new trading account types for their customers. But not all of them offer accounts that can be used by those who are practitioners of Islam.
When a brokerage has facilities for Islamic Forex trading, they can access a large customer base consisting of Muslims. Recently, a lot of brokerages have become aware of the rules that Muslims need to follow for trading currencies. Thus, they are introducing new types of accounts that allow them to trade without breaking any religious rules.
In today’s article, we shall discuss Islamic Forex trading in detail while also listing the things you need to keep in mind before opening an account. Some of the top brokerages offering this type of accounts will be covered as well, along with their pros and cons.
6 MT4 Brokers Offering Islamic Forex Accounts
Not all brokerage companies are the same. They differ in terms of regulations, trading fees, benefits, security features, payment modes, available instruments, etc. Here is a list of the top 6 MT4 brokers that Muslims can safely use to trade in Forex and earn some considerable profits along the way:
|Broker||Founded||HQ||Regulations||Platforms||Markets||Deposit from||Leverage up to||Website|
|2006||UK||FCA, CySEC, FSCA, SCB||MT4, MT5, cTrader, FxPro||Forex, Indices, Futures, Options, Stocks, Metals, Energies||$100||1:200||visit|
|2007||Australia||ASIC, FCA, CySEC||MT4, MT5, cTrader||Forex, Indices, Commodities, Stocks, Bonds, Futures, Crypto||$250||1:500||visit|
|2009||Cyprus||CySEC, FCA, ASIC||MT4, MT5||Forex, Indices, Commodities, Stocks, Metals||$5||1:888||visit|
|2010||Cyprus||FCA, CySEC, DFSA, FSCA||MT4, MT5||Forex, Indices, Commodities, Stocks, Bonds, Crypto||$5||1:1000||visit|
|2010||Australia||ASIC, FCA, DFSA||MT4, MT5, cTrader||Forex, Commodities, CFDs, Crypto||$200||1:500||visit|
|1995||USA||CFTC, NFA, IIROC, FCA, ASIC, MAS||MT4, Oanda Trade||Forex, Indices, Commodities, Bonds, Metals||$0||1:50||visit|
What is an Islamic Forex account?
Muslims hold the Quran in high esteem, and not all kinds of trading are permissible according to the Holy Book. But this does not mean that Muslims cannot engage in currency trades. To ensure that your trading does not interfere with your faith, you must find yourself a swap free account.
A generic trading account for Forex lets an individual accrue interest due to rollover or swap positions. But since this is not allowed as per Sharia law, you need an account where you do not earn any interest from the money you deposit. Another thing to remember is that the deal should occur as if the money is being handed over physically from one person to the other. In other words, there must not be any delay in payment.
Islam forbids its believers from earning any benefits from charity, and this is why Muslims cannot earn interest. One more thing you should take into account is currency futures. Here, two parties enter a contract to buy or sell a pair at a fixed price on a future date. This activity is forbidden in Islam.
As we know, there are roughly two types of Forex trading – short-term and long-term. If you keep your positions active overnight, then either you will earn some interest or pay some due to the change in the bank rate. From this, most people will make the assumption that Muslims cannot engage in long-term trading. But this is not entirely true, and there are brokerages that make accommodations, especially so you can follow a long-term trading scheme without disrespecting your faith.
How do I get an Islamic trading account?
To get this type of account, you first have to find a list of all the well-known brokers. They should be monitored by the proper authoritative bodies in the countries in which they operate. Some of the brokerages offer a fixed no-swap period for their accounts, while others have no such constraints. You may need to provide some evidence while opening the account and explain in detail why you need it.
Even if you have a regular account, you can request one that does not allow you to earn interest. The brokerage firm will authorize this type of account in 5-14 days. Before you open an account, you should carefully go through the rules and regulations that are applicable.
If you submit the required information and are found to be a legitimate candidate for a swap free account, you ought to be able to start trading immediately.
Things to consider before opening an Islamic Forex account
Let’s look at some of the things you need to keep in mind:
- Adherence to Islamic laws: This is the primary requirement that you must fulfill. It must not let traders earn interest through rollover or swap. Instead, you need to pay a fee for your positions. This is taken from your account balance.
- Trading expenses: Because you don’t pay any interest, brokerages often ask you to pay a fixed amount every month. Thus, while selecting a brokerage firm, it is wise to compare the overnight rates with the monthly fee. If you notice a large difference, you should start looking for other brokers.
- Spreads: This is one of the most vital factors for active Forex traders. It is nothing but the gap between the purchase rate and the sale rate. You should always go for an establishment that offers tighter spreads because it reduces the trading expense. This also lets you open multiple positions at the same time and keep the losses to a minimum.
- Security: A reputable brokerage firm will always make sure your funds are secure and that you can access them at all times. Hence, you should go for one that is recognized by the local authorities. A reliable firm should keep your money in a dissociated account that has no connection to the company’s money.
- Mobile platform: It’s not always possible to sit in front of a computer monitoring trading charts. Thus, you should choose a broker that lets you place trades via mobile phone.
Which are the best MT4 brokers offering Islamic Forex accounts?
Here, we have shared the details of some of the best MT4 brokers on the market today. You cannot point at one of them and call it the best since they have different functionalities suited for different trading styles. But after going through this list, you will no doubt find a brokerage that suits your needs.
FxPro: Best Overall
At this brokerage, you can apply for a Forex Islamic account. However, you may need to pay a fee in the event that a position on certain types of assets remains active for a certain period of time. You can get in touch with the service and request to open such an account. This firm offers tight spreads, matching your trades directly in the open market.
If you hold a contract on FxPro for more than one day, interest is not applicable. The rollover interest is nil, and you can use a Forex robot for placing trades with minimal manual intervention.
- Regulated by FCA, FSCA, and SCB
- Compatible with MT4 and MT5
- Advanced trading tools available
- Access to VPS server
- Expert advice from traders
- Excellent customer service
- No deposit or withdrawal fees
- High commissions
- Lack of bonus offers
- Lack of data on expenses for swap free accounts
XM: Best For Beginners
After opening an account with XM, you can verify it and request an Islamic account. One of the reasons why this broker is preferred by traders is that it does not charge additional fees for this type of account. All deals are carried out in real-time, and the trading rules are the same as generic accounts.
XM offers customer support 24 hours a day, 5 days a week. You can keep the positions active for as long as you wish, and unlike other firms, this one doesn’t employ spread widening. Here, you can enjoy maximum leverage of 888:1.
- 16 different trading platforms
- More than 25 distinct payment modes
- Supports Forex robots and scalping strategies
- Popular broker with a large customer base
- Protection against negative balance
- Licensed by ASIC, CySEC, and IFSC
- Not ideal for dealing in larger volumes
- Only 3 trading platforms supported
IC Markets: Best For Low Spreads
With IC Markets, you can trade without receiving interest for Standard as well as Raw accounts. It supports 3 different platforms, namely cTrader, Metatrader 4, and Metatrader 5. Here, you can get started with a small deposit of $200. With the Raw spread account, you can get 0 pips spread, and for a Standard account, you can get spreads starting from 1.0 pips.
For every $100k you trade on this account type, there is a certain amount of money you need to pay. The execution speed is quite high, and you can use a demo account to hone your strategies before risking real money.
- Favorable spreads
- Supports high-frequency trading schemes like scalping and hedging
- Allows you to engage in social trading
- Support ECN model
- Low commission
- It does not take customers from the USA
- It does not offer fixed spreads
- Limited collection of products
Pepperstone: Best For Providing Multiple Trading Platforms
This brokerage firm was launched in 2010, and its Forex Islamic account offers decent liquidity and advanced trading features. In case you keep a position open for 48 hours at a stretch, you need to pay a fixed fee. The official website has some quality educational resources, and the user interface is smooth and compatible with mobile devices.
For swap free accounts, the average EUR/USD spread is 1-1.2 pips. The minimum lot size is 0.01, while the maximum is 100. You can trade with EAs, and it takes only A$200 to get started.
- Favorable spreads
- Supports high-frequency trading schemes like scalping and hedginUser-friendly website
- Large collection of educational resources
- Multiple and withdrawal and deposit modes
- Large volume traded daily
- Favorable spreads and liquidity
- The dedicated customer service team
- Not regulated by the NFA
- No protection against negative balance
- Not suitable for novice traders
OANDA: Best for US Traders
The best thing about this firm is that it charges no commission for an Islamic account. The minimum spread for EUR/USD is 1.6, and the maximum trade size is 10 million. You don’t need to pay any extra charges for the initial five days, but from the sixth day, you need to pay a fixed amount every day.
You need to pay the administration fee based on the number of lots you’ve traded in. Applying for an account at this firm is quite simple, and it is transparent when it comes to trading expenses.
- Favorable spreads
- More than 70 different pairs are available
- Easy to use trading platform
- Simple application for the Islamic account opening
- Mobile platform with added features
- Low minimum deposit
- Unavailability of retirement accounts
- Charges monthly inactivity fee
- It does not offer negative balance protection for US clients
- Limited research tools
HotForex: Best For Zero Spread Account
At HotForex, the swap free period lasts for 7 days. After opening a regular account at this brokerage, you can get it changed to a swap free one. If you wish to start trading with a small balance, you can use a Micro account that complies with the laws of Islam.
There are different account types here that cater to different trading styles and requirements. You need only $5 to get started and can enjoy maximum leverage of 1:1000. The broker is regulated in multiple jurisdictions and keeps your funds in segregated accounts.
- High-end trading tools
- Freedom to use different strategies
- It can be used with MT4 and MT5 at the same time
- Low minimum deposit
- Regular promo offers
- A bit expensive
- The account may be closed due to inactivity
- The geographical location of a trader may affect account offering
- No guaranteed stop order
FAQs about Islamic Forex accounts
Here are some common questions and answers related to brokers that support Forex Islamic accounts:
Can you legally trade Forex under Islamic law?
Yes, you can legally trade in Forex under Islamic law once you remove the interest factor. If you don’t use leverage and don’t receive or pay interest for overnight positions, you don’t need to worry about breaking any rules.
How do you avoid swap in Forex?
There are multiple ways to achieve this. You can deal in positive interest if live results, as well as backtests, recommend trading that way. You can restrict your trading activity to intraday deals and close all open positions before the brokerage firm’s rollover time. However, this would require you to build a strategy for intraday trading. Alternatively, you can open an Islamic account with any of the brokers mentioned above.
Which markets can I trade with an Islamic Forex account?
If you have an Islamic Forex account, you can trade currencies and CFDs, but you cannot trade with leverage in a standard way since it means you will have to pay the broker a commission at a later date. There should be no interest, and instead, you will need to pay more in terms of commissions for spot trades.