Asking for a family member. A family elder involved this younger brother in Forex trading and he has seen success as well, now he is finding out that forex trading might be haram.
Want to understand the final verdict on forex trading if it is permissible in any circumstances or conditions or if its not.
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
Forex in itself stands for Foreign Exchange. Islamically such a transaction where one purchases or sells one currency with another is called Bay’ al-Sarf. This is permissible and it has its own conditions for validity.
Forex Trading is referred to using this market of buying and selling currencies to speculate the change in value of currencies to make money. Most transactions conducted in this endeavor require a large sum of money to make considerable profit margin on fractional changes. Hence, the market move over to leverage, short sells and other such mechanisms.
All such mechanism in one way or another violate shar’i guidelines and thus impermissible. In some instance, you would have to undertake loan on interest, while in other place you may sell something which you do not possess at this time. Similarly in other instances you may utilize speculative binary options for bids which would be akin to gambling.
Hence forex trading as a means of making money is not permissible. Yes, the market may be used to exchange currency to hold on and sell at another time after taking possession on the currency.
Normally a universal answer is not given for “forex trading” because there are many different strategies and tools within it which each require its own detail response. Nonetheless, the cautionary approach is to avoid forx trading altogether for making money.
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi