Forex traders are doing exceptionally well in Forex trading, computerized “Forex trading in Pakistan” has become very popular among young traders. That’s why many Forex Brokers have now registered and began providing Forex trading to Pakistan traders. Foreign Exchange brokers are now proposing Islamic Forex trading accounts to Pakistan traders.
Islamic Account
An Islamic Forex account (also referred to as swap-free accounts) is a halal trading account that proposed to clients who wants to take the position within the Islamic stock exchange in keeping with the principles of Islamic finance.
These forex accounts differ in many ways from regular Forex accounts and are provided to traders who want to do halal Forex trading without having to separate their investment activity from their religious principles. For a broker to declare that the accounts they are providing are according to the Islamic principle, accounts must satisfy a minimum of the subsequent conditions:
- Immediate execution of trades.
- Immediate settlement of the transaction.
- No interest owed on trades.
- Prohibition of gambling.
- Distribution of risks and benefits.
These accounts adjust to Islamic conditions and are offered exclusively to Muslim traders. These are distinct Forex trading accounts that:
- Do not charge any interest.
- Comply with Islamic principles.
Swap Fee
A swap fee or rollover fee in forex deals with the interest that you just earn or pay for a trade that you simply save overnight. The swap fee is also applied if traders hold the positions at the daily rollover point, which is 00:00 server time. They’re presented in pips per lot, and vary counting on the financial instrument you’re trading.
Types
There are two main types of swap fees:
- Swap long fee (used for keeping long positions open overnight)
- Swap short fee (used for keeping short positions open overnight).
Positive Swap
It represents a positive difference between the interest charged and received, and so traders receive the difference within the trading account e.g., you’re charged a positive swap when you buy a currency with a higher rate and sell a currency with a lower interest rate.
Negative Swap
In forex, a negative swap represents a negative difference between the interest charged and received, and so the difference is going to be taken out from the trading account e.g., you’re charged a negative swap when you buy a currency with the lower rate and sell a currency with a higher rate of interest.
Are these swap fees high?
The swap fee for major currencies is not very high. However, it could vary a lot, and as somebody who is simply getting started, you must not bother about the possible variations. However, if you’re serious about it and would like to induce into long swing trades or if you’re keen on holding onto the trades for some weeks at one go, you need to put effort into research. You should visit some websites and also use calculators so that you’re updated about the possible outcomes by using the swap option.
Swap fee may be considered haram
One of the foremost individualities of Islamic trading is that it does not generate any swap interest, as within the case of all other forex trading accounts. The swap fee is a fee paid or received by the trader when he leaves an open position on the foreign exchange for more than 24 hours or overnight. These fees are a form of interest rate, that is why they’re problematic for Muslim traders who follow Islamic laws, which forbids certain financial transactions counting those that contain the accumulation of interest and all types of loans, and interests are prohibited (haram) in the Islamic world. That’s why it makes foreign exchange trading haram.
Though, Islamic forex trading accounts remove these interests to permit Muslims to interchange the halal exchange. However, the question is, what commissions do Muslim traders pay?
All Muslim traders who use an Islamic forex trading account pay the margin, commissions, and organizational charges, which aren’t the interests of Riba Haram.
Brokers with good swap-free accounts
Many brokers in Pakistan are offering swap-free accounts. Following are the list of few well-known brokers that are providing swap-free accounts to Muslim traders.
XM brokers
XM brokers offer Islamic accounts (or Swap-free accounts) to the Muslim traders according to the Islamic laws as they charge no swap or rollover interest on overnight positions, which is against Islamic beliefs.
Account features
- No interest/swap fee on overnight positions
- No spread widening
- Positions can be held with no time limit
- Leverage up to 888:1
- 100% real-time market execution
- Same trading conditions as for our trading account types
- Free and instant access to all trading platforms
- 24/5 dedicated support from your Client Account Manager
Benefits
Forex Islamic accounts provided by XM brokers are different from those accounts that are generally offered by other forex brokers. The difference lies in the fact that, unlike most forex companies who additional fees on Islamic accounts, XM enforces no additional charges.
To stand by the laws of Islam, traders of the Islamic faith are prohibited to pay any kind of interest. Even, if the interest fee is converted to a different type of fee, it is still a charge that covers the interest charges. This is also known by the name of swap-free. XM brokers are against such practices that’s opposes fair and ethical trading conditions.
AvaTrade
AvaTrade is also one of the best brokers that offer Islamic accounts. This account is similar to a basic one, with one major difference, that is it is not subjected to any special fees. This account sits well with the Islamic finance values of sharia laws.
Customers with Islamic trading account will not be charged daily swap fees. The swap charges are completely transferred within the MT4 platform into daily administration charges on all the forex trading products.
HotForex Islamic Account
HotForex is another good platform that provides an Islamic account for Muslim faith traders together with a swap-free account. The Islamic forex trading environment is perfect for traders who are following strict sharia law with a fixed charge instead of swap. This fee is not an interest and depends on the direction of the order.
easyMarkets
Easy trade is another well-known platform that provides the services of swap-free accounts and doesn’t charge any interest or swap fee. It offers variety of assets including forex, stocks etc. they are also dealing with the spreads, easy risk managements and other features.
Assets that cannot be traded with an Islamic account
A Muslim trader who wants to follow the principles of Sharia law to partake in Islamic trading has the right to think about which assets he may or may not invest.
Cryptocurrency trading
Cryptocurrency trading is one of the main assets of trading that is not available on Islamic Accounts. To trade Cryptocurrencies, traders must give up their Islamic Accounts. They’ll also subject to some special fees or interest i-e haram.
Certain FX instruments
Some FX instruments such as ZAR, TRY, RUB, MXN pairs are also not available on Islamic accounts. Traders need to give up their Islamic accounts to trade these pairs.
Islamic accounts are exposed to an increased spread on FX pairs.
CFDs
Trading on CFDs also not allowed under Islamic laws. This is because when you buy a CFD you are not really buying anything tangible. As an alternative, you are gambling on the price rising or falling. By opening a no-swap, Islamic account the trader is avoiding the issue of taking or giving interest.