Internet currency trading : forex

Fatawa Question

[Question One] : As-Salamu Alaykum Wa Rahmato Allah I have been introduced to the forex market (the foreign currency exchange market) which is mainly based on a system like the stock market , but instead of buying stocks in companies I buy currencies , it works like this , I open an account with a broker and transfer money to my account in US dollars and based on some calculations and economic indicators I choose for example to sell a part of this money and buy euro and wait a few days then the euro value goes up then I sell and make profit , all the selling and buying are made spontaneously at the same moment which is called spot trading . What I want to ask is whether is this Halal or Haram ? and the forex market is mainly based on leverage which means that if I put 1000 $ in my account I can buy currencies up to 100,000 $ which is having a ratio of 1 : 100 , meaning that the broker lend me money to trade with and I pay this money after selling my positions (my currencies) with no interest . And the ratio is kept 1 : 100 for the broker to secure himself cause if he lend me 100,000 $ for me to make (on an extreme scale) a loss , I will be selling the currencies for 99,000 $ , so if I made a loss he will securing himself by the 1000 $ in my account . So is leverage considered Haram ? [Question Two] : Thank you for your quick answer , and I hope I am not bothering you . I don't work in Forex but I have a friend who is has a brokerage company in forex here in Egypt and wants me to do some editing in his website, and accordingly I had to learn all about forex. There is one last thing I want to ask, there is a large bank in Europe that works in forex mainly, it is not a broker for another firm, and allows individuals to open accounts (but with larger amount of money) and all the spot trading that made on this bank is made at the moment and with money inside the bank there are no contract this banks takes to another bigger bank after 2 or 3 days. Is this also considered the same case or does it differ ? As-Salamu Alaykum Wa Rahmato Allah

Fatwa

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Publication Date

2006-12-28

Main Subjects

Economics & Business Administration
Islamic Studies

No. of Pages

3

Data Type

Fatawa

Language

English

Record ID

BIM-788656

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