As it is well known, the Islamic world lives according to its own laws and principles that every Muslim is obliged to respect and honor the sacred. Not to mention the everyday and religious way of believers, the bans of Sharia, known as "Haram", make adjustments also in the economic sphere of life.
The things that in non-Islamic world seem familiar and commonplace, for Muslims these are simply impossible. For example, many banks in Muslim countries operate from Sunday to Thursday, because Friday is considered a free day. All the transactions are also made in these specific days. More than this, the Sharia forbids the credit with interest rate. That is why the bank rates are calculated for Muslim clients more complicated. If you will look closer, you will notice that there are more restrictions than permitted things, so it is not surprising that banks and financial institutions are trying to get out of the situation by introducing its specific standards for Muslim customers.
What is the Islamic Forex account?
The Forex Islamic Accounts allow customers that share the Islamic religion, to trade on accounts without percentages (without swap and without rollover), at no extra charge or penalty for the opportunity to trade in accordance with Islamic religious principles. Customers can open and close positions at any time on some platform, without being forced to hold them within a certain period of time.
Trading accounts without swaps are designed for traders who use trading systems that do not take into account the impact of swaps or for those customers who cannot use swaps because of their religious beliefs. This determines the name of this type of accounts: "Forex Islamic accounts". In accordance with fair trade, swap-free accounts and trading conditions remain in force just like a standard trading account.
In carrying out transactions with the trading account without swap, with any currency pair, and leaving positions open overnight – the traders do not receive and do not lose any percentage, regardless of the volume of trade. Even if the position remains open for a long time, the trader can be sure that the open position will not be charged an interest.
The old and experienced currency traders very well the possibilities that can appear with an account without incurring the expense of swaps. If you are not familiar with the term "swap" - it means the fee for the transfer of open positions through midnight. All intraday transactions on the Forex are spot transactions, as long as the transaction opened during the day will not be carried over to the next day. In the last case, the position is automatically converted from the spot in the swap deal transaction. Such a deal provisionally is closed with the end of the day and opens at 01:00 GMT. Of course, this operation is not free of charge, for the transfer of an open position for the next day is charged a fee by the broker. Swap in Forex can be both negative and positive, depending on the current values in the base rates of traded instruments.
So, where originates the name "Islamic account" from?
With Forex Islamic accounts, there won’t be charged interest on the rollover or positions remaining open at night, in accordance with the Islamic law of Sharia.
If you look in the history of Islamic accounts, you can see some connection with religion. Muslims and their book, the Quran, state that any business operation, where you get a percentage or pay one of the parties, is strictly prohibited. That is, any form of usury, or the ability to "make money from money" is strictly forbidden. And it is actually to this process the swap fee is actually related to.So initially, swap-free accounts have been created specifically for Muslims, since the calculation of interest rate - swaps are contrary to their faith.
Swap free accounts offer the possibility to trade on any currency pair, and when moving the position over midnight the account is not removed, and the amount of the swap is not charged. Swap-free accounts allow Forex traders to keep positions open indefinitely, in their accounts. The result of the transaction may be affected only by the change of the exchange rate or the actions of the trader itself.
The characteristics of the Islamic Forex account
How many significant benefits you will get with an account without swap? It all depends, of course, by the trader, the amount in the account and the trading strategy. Medium- and long-term trade with sittings out can increase the amount of swap in the negative direction to several thousand dollars. For such a trading, the profit of swap free accounts is undeniable.
You can consider the main characteristics of Islamic (no swap) account as follows:
- No interest / charging for the swap position for night
- No prior interest charges
- No extension of spreads
- The lack of time limits
How to open a Forex Islamic account?
It is important to understand that customers cannot have both types of accounts at the same time (Islamic and standard one). On many platforms, there are offered to the customers the ability to open an Islamic account without any restrictions on the US dollar as the base currency and the proposed leverage provided with the condition that the account holder has the Islamic faith. Of course, you don’t have to repeat the Quran by memory, but it will be necessary to submit a certificate on religion, signed by the imam of the mosque. In Muslim countries, most of the data are already included in the official documents of citizens, in order to simplify the collection of documents for financial institutions, because such a request is made also by the banks when opening an account.
Forex Islamic account is a step towards the customers, adhered to their religious beliefs. Someone who cannot simply open an Islamic account can think about a kind of discrimination to the rest of the world, but it should be understood that this service, which is a synthetic one and actually invented, does not work according to the law of the market and its use is not a whim but a necessity due to the religious rules.
Where to open an Islamic Forex account?
Not all brokers and dealing centers offer the possibility of opening Forex Islamic accounts. Most often these are companies that focus on the Muslim world. Among them is the company FXOpen, the leader of the Asian forex market, which enables its customers to act in the currency market in full accordance with their religious beliefs. To open an Islamic account will need to make a request and also to provide documents proving that you are a Muslim.But be careful to read the contract, because some brokers charge additional fees on Islamic accounts due to lack of swaps. Now, when you understand what is the Islamic Forex account, you can choose a broker, show the certificate if you are a Muslim and start trading.