Is Forex Trading Halal?

Answered by Shaykh Abdul-Rahim Reasat

Question

Is forex trading halal or not? In my research, I found out that there are some conditions where forex trading is halal like:

1. If the currency you exchange with, you have full ownership rights over it. It shouldn’t be imaginary. While in most forex brokers, this is done in most cases. But what if i have USD and i just trade with the USD pairs will it be halal then?
2. There is a concept of margin trading, leverage which I understand as well but is there a strict ruling on it?

Answer

I pray you are well.

Forex trading is not permissible according to leading experts in the fiqh of finance. It contains a number of elements which are deemed impermissible in the Shari’a, such as not being able to take delivery of the purchased currency, Margin trading, and leverages. (Usmani, Fiqh al Buyu’)

All these elements lead to elements of impermissible trading in the Shari’a. It is based on making money a commodity, which is against the entire approach if finance in Islam. Another problems is the concept of forward sales, where one sells things he does not yet own. This was prohibited by the Prophet (Allah bless him and give him peace) when he said, “Don’t sell what you don’t possess.” (Tirmidhi)

Although avoiding this may seem difficult, it is easier than the consequences of going ahead with it. Doing so would affect what really matters. The Messenger of Allah (Allah bless him and give him peace) said, “…Indeed, a servant will [causally] toss an impermissible morsel into his body and [nothing] is accepted from him for forty days. Any flesh which grows with the impermissible the Fire is more rightful of it.” (Tabarani) May Allah be our refuge.

Please refer to these answers for more details. 

May Allah grant you the best of both worlds.

[Shaykh] Abdul-Rahim Reasat
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Abdul-Rahim Reasat began his studies in Arabic Grammar and Morphology in 2005. After graduating with a degree in English and History, he moved to Damascus in 2007, where, for 18 months, he studied with many erudite scholars. In late 2008 he moved to Amman, Jordan, where he continued his studies for the next six years in Sacred Law (fiqh), legal theory (Usul al-fiqh), theology, hadith methodology, hadith commentary, and Logic. He was also given licenses of mastery in the science of Quranic recital. He was able to study an extensive curriculum of Quranic sciences, tafsir, Arabic grammar, and Arabic eloquence.