Is Trading With Leverage Halal? - Ask Ghamidi (2024)

FAQs

Is Trading With Leverage Halal? - Ask Ghamidi? ›

Additionally, all kinds of trade are halal except those that may involve anything immoral. If you're satisfied that there's nothing immoral in your trades then you may use leverage to your advantage.

Would it be okay if I use leverage trading? Yes, leverage trading is halal in Islam. Leverage is nothing more than employing debt to buy a security or implement an investment strategy. That said, the investment that the trading platform's leverage is being used for must be in compliance with Shariah.

You might be surprised to learn that leverage itself is absolutely fine to utilize as long as the investment instrument doesn't violate Sharia law. Unsurprisingly, you have to avoid trading that involves any swap fees. You must only use forex brokerage accounts that take into account the Islamic faith.

' ”50 The Islamic Fiqh Council's resolution prohibits margin trading even though the client is not charged any interest if the position is closed before the trading session ends.

Leverage is the use of borrowed funds to increase one's trading position beyond what would be available from their cash balance alone. Brokerage accounts allow the use of leverage through margin trading, where the broker provides the borrowed funds.

Leverage trading involves borrowing funds from a broker to increase your position size, which can result in more exposure to market movements and potential profits.

Commodity trading in items like gold, silver, or agricultural products can be considered Halal (permissible) under Islamic law, provided the transactions adhere to Islamic principles.

Understanding Maximum Leverage

Leverage on currency trades can be anywhere from 50 to 400 times. Exceeding or even getting close to the maximum leverage point can be an untenable situation for forex traders, since a small price movement can quickly wipe out the entire amount of equity in the trading account.

5x leverage: $100 × 5 = $500. Thus, we can buy $500 worth of stock with only $100. 10x leverage: $100 × 10 = $1,000. Thus, we can buy $1,000 worth of stock with only $100.

Forex traders should choose the level of leverage that makes them most comfortable. If you are conservative and don't like taking many risks, or if you're still learning how to trade currencies, a lower level of leverage like 5:1 or 10:1 might be more appropriate.

Is margin and leverage the same? ›

The sum amount invested by an individual, including the collateral provided is called the margin, and this practice develops a trading power called leverage. Margin is majorly used to gain and generate high leverage that has the ability to increase both profit and losses.

Faleel Jamaldeen includes margin trading as one of the activities prohibited by the "majority of Islamic scholars", the reason being it involves borrowing funds to invest, and the lender of the funds charges interest.

What do Islamic scholars say about crypto? Many Islamic scholars seem to agree that, as it stands, cryptocurrency is haram, and should be avoided by Muslims. Indonesia, the world's largest Muslim-majority country, has banned cryptocurrency trading.

Since not everybody can afford to purchase 100,000 currency units, leverage comes in to aid those traders with very low investment capital. This means even if you have $50 or $100, you can still open a position in the forex market.

Canada Bans Crypto Leverage, Exchanges Must Segregate User Funds.

The best leverage for $100 forex account is 1:100.

If your leverage is 1:100, it means for every $1, your broker gives you $100. So if your trading balance is $100, you can trade $10,000 ($100*100).

According to Islamic scholars, the permissibility of forex trading depends on the specific circ*mstances of the trade. In general, forex trading is halal as long as it is conducted within certain guidelines. These guidelines include: No interest-based transactions.

Margin trading, day trading, options, and futures are considered prohibited by sharia by the "majority of Islamic scholars" (according to Faleel Jamaldeen).

In fact, futures are speculation on the value of assets. Betting is the same as gambling in Islam, which means haram. So, generally, crypto is halal in Islam, but be cautious when trying futures trading instruments and always check compliance with local laws and traditions.