I Trade Futures Contracts Using an Intraday Scalping Strategy, Is This Trading Halal?

Answered by Shaykh Muhammad Carr

Question 

I trade futures contracts using an intraday scalping strategy. I open and close all trades within the same day and never hold positions overnight. I use only my own capital and apply leverage based on my own funds — no margin, borrowing, or interest (riba). My trading strategy relies solely on technical analysis, including indicators and price action, rather than luck or gambling, and I adhere to strict risk management principles. The contracts I trade are standardized and regulated (such as by the CME), and I avoid engaging in any questionable or unclear business practices.

I don’t take physical delivery of assets; I only trade based on price movement. Is this trading halal?

ِAnswer

Thank you for your question.

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

Trading in this manner is not halal. While it passes specific Islamic legal requirements, you mentioned, it falls short when assessed against other criteria.

Futures contracts are impermissible as they amount to selling a liability for a liability, which the Prophet (Allah bless him and grant him peace) prohibited. [Hakim, Mustadrak]

Furthermore, trading based on price movements is essentially the premise of a Contract for Difference (CFD). In a CFD, you don’t own the underlying asset (such as a stock, commodity, or currency) but speculate on its price movements.

CFDs (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. The Prophet (Allah bless him and grant him peace) said, “Do not sell that which you do not possess.” [Tirmidhi]

What are Futures Contracts?

Futures contracts are agreements in which a party commits to buy or sell a specific commodity, currency, or other asset at a predetermined price on a future date. While these contracts are legally binding, the underlying asset is rarely exchanged in practice. Instead, when the contract reaches its maturity date, the transaction is settled by paying or receiving the difference between the contract price and the market price, rather than delivering the actual asset.

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 benefitted 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 for 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’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.