Islamic Account
About Islamic Account
Those who trade Forex for the first time might find many of the terms a little confusing and will need additional explanations, just to clear things out. For example, many inexperienced traders have heard about the Islamic Account and they don’t know exactly what it implies and which are the differences to a regular Forex Account. Since many of those who have money and are willing to invest them in the lucrative business of foreign exchange are Muslims, this question will pop up very frequently.
The idea behind Forex is to be a global market where everybody has the same chances of making profit and this was made possible when the internet shattered the barriers. A Forex Account is easy to set up and with the help of a broker, you will be able to start trading as soon as you deposit money, or even earlier, by using a demo account. Still, there are some things that brokers need to fine tune, just to make it possible for people living under strict laic or religious laws to trade Forex.
An Islamic Account is the shinning example of how a solution can be found whenever there is the will to do it, and this particular Forex Account deals with the issues raised by Shariah law. It forbids Muslims to take or pay interest in their financial transaction, which was clearly problematic, since Forex is based on trading currency. By offering a No Riba Forex, which is basically nothing more than foreign exchange with no interest, these special accounts make it possible for everyone to take part.
Another concept specific to the Islamic Account is the Musharaka, which states that the profits between players will be split according to a preliminary agreement. To solve the problem of rollover fees which occur when a trader leaves a position open over night, this type of Forex Account waves the SWAP fees. It seem very appealing to open an Islamic Account since there are no interest fees or commissions, but there is more than meets the eye about these accounts.
While they are essentially the same with any other Forex Account, the Islamic version will include higher spreads and sometimes hidden charges, that the brokers use to offset their loses. Knowing about these shortcomings is very important, because you will get the chance to prepare for them and think twice if it is better to open such an Islamic Account. There are no restrictions for opening one and you don’t have to me a Muslim to sign up, but you should weigh the benefits and downsides.