Is Forex Halal in the Eyes of Muslims?

Is Trading Forex Halal?

Many Muslims still have doubts whether trading on the Forex market is halal or haram, meaning whether or not it is allowed by the religion. What are the opinions of Islamic scholars regarding the trading of foreign exchange, stocks, index and commodity? Is trading these instruments unlawful in the eyes of Islam?

Nabi Muhammad SAW said in the story of Abu Hurairah, "You should not sell what you do not possess."

So if interpreted literally, any trading of currency, stocks or commodity will be considered forbidden, as they are goods not physically in our possession. But then again, we have to think as time changes this statement might have only been applicable hundreds of years ago and haven't developed with time.

Several more modern thinking scholars such as Ibn al-Qayyim definitely opposed to the literal intepretation of this statement. This prohibition was not found in the al-Quran, fatwa or sunnah.

In Sunnah Nabi, it was indeed prohibited to sell something which does not belong to you, not in the sense that you do not have it physically as we would think in the context of foreign exchange and stocks, but in the sense that the item or product being sold actually belongs to someone else. For example, to sell a lost camel is indeed illegal in Islam as you have not obtained the permission of the original owner to do such a transaction!

It is legal when you make a transaction where the goods are guaranteed to be handed over to the buyer (We would definitely hand over the pound sterling in exchange of U.S. dollars when we close our trade in the Forex market). But it is ILLEGAL to make a transaction where the camel's owner can suddenly show up to claim ownership and take the camel away, then you do not have the goods to hand over to the buyer.

These are the rules that deem the legality of a transaction:

• The goods must be clearly defined in terms of the kind, the characteristics, the amount, the price exchanged and the place of transaction
• The medium that exchanges hand for the transaction must be clearly defined; dinar, dirham, rupiah, dollar, or things that can be measured or weighed.

And so, to the best of our ability of intepreting the written Islamic laws, the trading of currency, stocks and commodities is in accordance with the spirit of the Islamic law.