Binary options trading and sharia legal in uk
They have their own set of principles and will always follow the guidelines established by their religion; even in business matters. The average binary trader can earn interest by trading overnight or over the weekend when the markets are closed.
This is an important strategy and must be available to any trader. However, Muslims are forbidden from earning interest in any form; this means that a Muslim trader needs a special Islamic binary options account to ensure they do not fall foul of their religion. As awareness of this issue rises, more and more brokers are offering the ability to trade without incurring any interest charges or even earning interest. Brokers who are offering an Islamic binary options account understand the importance of no interest being charged or even earned.
This is a principle which is integral to the Muslim belief system. It is a reflection of the religious belief that giving should be done without expecting reward. In response to this the brokers are offering accounts which operate in much the same way as the traditional accounts but which are specifically designed to avoid the scenario of interest. This is often tied in with closing trades before the end of the day or pausing them overnight. If you wish to utilize an Islamic binary options account you will need to understand that a halal account is one which is allowable under the Muslim guidelines, whilst a haram account is forbidden.
A Halal account needs to operate on an instant basis; there can never be a delay which provides the opportunity to earn interest. Equally, any profit generated must be immediately placed into the client account to prevent it earning interest. It is also important to ensure that all payments are completed in one transaction and no interest has been earned or charge by any of the parties involved in the transaction.
It is also important to recognize that a halal binary options broker will not allow you to bet or take chances with your funds; this is also forbidden by Islamic law. It is essential to understand the market you are speculating in and trade with caution at all times. This means using self-control, utilizing all possible price charts and economic information and observing other traders.
It does not mean undertaking risk free trades which are likely to make you take a chance. You must also be prepared to share your trading information with your family and other interested parties.
Trying to trade when you are emotionally disturbed or simply to increase your wealth is strictly forbidden by Muslim law. Equally not informing your family of your trades can be seen as a neglection of your duties under Islamic law.
This also means you should not trade if you are addicted or if you are simply trading in an attempt to recover initial losses. It goes without saying that you can never borrow funds to start trading. This is something which should apply to all traders not just those operating under Muslim law.
There has been a gradual increase in the number of brokers offering Islamic binary options accounts. In general these accounts are created to run alongside the traditional style account and offer access to all the same features; except for anything which goes against Muslim law.
To qualify as a halal account it is essential for an approved broker to ensure the accounts are Sharia compliant and all charges and earnings are declared openly to those who need to see them. The trades must all be closed at midnight to ensure they are compliant with the interest regulations and the same assets should be available to Islamic traders as to any other traders.
It is amazing how in a few short years, the industry is now recognized as a credible and incredibly profitable sector of investment. While many traders can sign up with a broker and start trading without any doubts, such is not always the case with traders abiding by the Islamic faith. The Islamic faith, while it stretches to all corners of the world as one of the major religious beliefs, has many particularities according to Sharia law.
In relation to investments more specifically, Sharia law strictly forbids any type of lending of money with interest. When it comes to investing, Muslims are guided by the concept of risk sharing. In the literature of the Sharia law, two terms appear most frequently in relation to investments: Riba , meaning interest, is defined as a typical loan where the borrower, upon full repayment, will have paid the lender more than the original amount due to accumulated interest.
Riba under Islamic law is strictly forbidden. On the other hand, gharar is a financial term meaning risky or hazardous sale. In this case, a hazardous sale can be described as a transaction where the product being sold is either unknown or not clear. As with riba , gharar is also prohibited under Islamic law, which forbids any type of trade that has an element of excessive risk and uncertainty. When it comes to trading, many brokers as we will explain below have found a way to work around the prohibition of riba.
However, dealing with gharar is a bit trickier. Since any type of investment involves a certain level of speculation within volatile markets, it is considered suspect. And because it is suspect, most interpretations of Sharia law forbid the activity. Muslims interested in binary options often face a dilemma: This poses an issue since binary options can be traded on a hour basis. By the time 5pm rolls around NY time , all open market positions roll over to the following hour cycle.
It is this very interest that makes the trade inherently haram for Muslims. Fortunately, many brokers are starting to adapt to the various prohibitions by Sharia law in order to attract and retain the Muslim clientele.
As such, any trader abiding by the principles of the Islamic faith may select a broker who offers an Islamic, no riba or Sharia account. Since this is far from a black and white issue, Muslim traders need to have full confidence that brokers are able to accommodate their religious beliefs.