Leverage and the rule of trading in itadmin - October 7, 2021
There is no doubt that some who deal in the forex trading market or who want to enter the forex market have many questions about financial leverage and its ruling in Islamic law. This question concerns a very large segment of people, and here we will present the predominant opinion of the majority of jurists for those who want to investigate what is permissible.
We have previously explained that currency trading in the forex market and with forex companies is through leverage, which we have already explained and defined before in this article. The 26 most important terms in the world of forex trading .
It works with the system of doubling the purchasing power of the amount you want to buy, if you want to buy a contract of the size of 1 dollar and the leverage used is 1:500, this means that you can buy a financial instrument of any kind, a currency or a commodity with a value of only 500 dollars with a down payment of 1 dollar This is the executive method and the purchasing power that it gives you the financial leverage, and this is a very wonderful thing in terms of doubling the purchasing power, but what about the opinion of religion and Sharia? This is the most important for forex traders in the Arab world and here we will show you all the details.
Reasons for prohibiting leverage
There is a majority of jurists who favored the prohibition of dealing with financial leverage, and of course they have their own jurisprudential reasons that are based on the opinion of religion and the evidence that we will explain here:
1- interest-earning loan
The Prophet, peace and blessings be upon him, forbade that in his hadith: “Every loan that brings a benefit is usury.” The financial leverage is a loan that the (lender) gives, which is the forex company or the broker (to the borrower), which is the trader for the purpose of trading and trading “buying or selling.” Dealing through this same company brings a benefit to the lender (the company) because of the commission that increases with the increase in the volume of transactions. Therefore, it is not permissible to deal with this leverage.
This leads to combining a loan with compensation (broking), which is in the sense of combining a loan with a sale that is forbidden by Sharia, in the words of the Messenger, may God’s prayers and peace be upon him: (It is not permissible to advance and sell) the hadith narrated by Abu Dawood (3/384) and Al-Tirmidhi (3/526). He said a good talk properly . Thus, he has benefited from his loan, and the jurists have agreed that every loan that brings a benefit is from forbidden usury.
2- The interest in this transaction is realized through “overnight fees”
It is the conditional interest on the trader if he does not act in the transaction on the same day by selling and closing the contract, which may be a percentage of the loan, and this is considered explicit usury represented by the increase in the loan amount.
He says: (O ye who believe, fear Allah and give up what remains of usury, if you are believers if they do not take a notice of war from Allah and His Messenger, even if you have your heads do not do wrong, nor do you wrong) Cow / 278.279.
Also, there are some things that are forbidden and forbidden by Sharia, which the forex trader must warn of in order to avoid prohibitions, and that trading is permissible until God blesses him in trading.
Trading in option contracts and futures contracts The decision of the Islamic Fiqh Academy in Jeddah No. 63 stated in its sixth session that options contracts are not legally permissible, because the contracted item is neither money, nor benefit, nor a financial right that may be substituted, and the same are futures contracts and index contracts. Also, trading on gold and silver is, as the hadith of the Messenger of God states, stipulating that it is necessary to exchange one another.
In summary, there are some things that are not permissible by Sharia, such as financial leverage and some of the above-mentioned transactions. If they are done under the same conditions, they are forbidden
When are transactions halal?
Investing in the global currency market called forex may be permissible or may be forbidden according to the observance of the Shariah controls in this, such as realizing the exchange, even if it is a rule in what is stipulated in the exchange, such as currencies, gold, and silver, and avoiding the legal prohibitions such as financial leverage, and overnight fees, and not selling what one does not own, Circulating in what it is not legal to circulate; Like binary options, and so on
If the investor avoids these and other precautions, and adheres to the legal regulations in exchange and other things.
Forex trading is halal if it is free of all the conditions that make it forbidden, so it was our duty to present all opinions and directions.
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