Is Income from Simulated Forex Trading Halal or Haram?

Answered by Shaykh Muhammad Carr

Question

I pay an evaluation fee to trade on a simulated forex account. I am granted a simulated funded account to trade CFDs if I reach the profit target. I do not incur any financial losses—the firm bears them. When I make a profit, I receive a payout, which is funded by the evaluation fees paid by other participants who do not pass. Is this form of earning halal?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

May Allah reward you for ensuring that your income is permissible.

Allah says,

“O you who believe, devour not your wealth between you through falsehood; but only through trade by your complete mutual consent.” [Quran, 4:29]

Income earned on a simulated funded account to trade CFDs is impermissible. In a service agreement contract (ijara), the service (manfa‘a) must have a value. Simulating an impermissible service does not have a legal value. [Khatib, al-Mughni]

Simulated Trading

As the name implies, simulated trading involves a simulated trade that incorporates all the essential elements of an actual trade but without real-world consequences.

Simulating impermissible actions is not permissible, as it involves 1) training and developing proficiency for its actual execution, 2) desensitization, and 3) a form of unwarranted endorsement through performance (istihlal fi‘li).

Simulation is akin to imitation (tashabbuh). Ibn Hajar al-Haytami says,

“If conventional coffee is served like wine is, it would be impermissible, otherwise not.” [Haytami, Fatawa al-Fiqhiyya al-Kubra]

This ruling applies a fortiori to simulation.

Contracts for differences

Contracts for differences are impermissible, as you do not own the underlying asset. Mutually taking possession of the commodity and its counter-value (taqabud) does not occur in contracts for differences.

I pray this is of benefit and Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefited from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.