Shaykh Abdul-Rahim Reasat answers a question on the legality of margin trading.
Can you please confirm if margin trading is permissible? This is where you predict if the market will go up or down by using leverage positions.
I pray you are well.
Margin trading is not permissible for a number of reasons. Firstly, because it entails entering into a interest-bearing contract with the broker. “The Messenger of Allah, Allah bless him and give him peace, cursed the one takes interest, the one who gives it, the one who writes [the contract], and those who witnesses it.” (Muslim)
Also, the use of leverage positions, as done in Forex, is problematic as this process uses instruments, such as options and futures, which fundamentally contradict the nature of a sound, Shari‘a-complaint contract. (Mufti Taqi Usmani, Fiqh al-Buyuʿ).
It is better to ask Allah to open the doors of halal provision for you; you’ll be saved from the problems that rain down on people to deal with interest.
May Allah grant you the best of both worlds.
Checked and approved by Shaykh Faraz Rabbani.