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In an online trading ecosystem that has become increasingly globalised, Islamic finance is still the standard in most of the MENA region. A core element of Islamic finance is Islamic trading. So, what exactly is Islamic trading? Let’s explore.
Understanding Islamic Finance
Before we analyse Islamic trading, we have to understand the concept of Islamic finance. Islamic finance is the umbrella term given to a methodology that operates according to the principles of Islamic law, or Sharia Law.
Sharia Law imposes certain conditions that both permit and forbid specific activities. Among them are:
Prohibition of Interest (Riba): Interest (riba) is forbidden in Islamic finance. This is the main distinction from conventional finance.
Risk Sharing (Mudaraba and Musharaka): Risk between parties should be shared equally, and prioritised over profit from guaranteed interest or fixed returns.
Ethical Investment: Investments can only be made through permissible (halal) activities. They cannot be made through forbidden (haram) activities that break Islamic values such as gambling, alcohol, or weapons.
Islamic trading must follow these guidelines to be considered legitimate
Islamic Trading - Key Concepts
There are also certain key concepts that pertain specifically to Islamic trading, such as:
Avoidance of Speculation (Gharar): Islamic trading encourages the avoidance of excessive uncertainty or speculation. Highly speculative activities like gambling or extreme short-term trading are forbidden.
No Interest or Swap: The practice of charging or paying interest is prohibited.
Charity (Zakat): A percentage of trading profits is often donated to charity as part of the Islamic concept of wealth distribution, or zakat, reinforcing the ethical and social responsibilities that come with Islamic finance.
These key concepts provide a solid overview of acceptable and forbidden practices according to Sharia Law. However, let’s take a look at more concrete elements and examples of Islamic trading.
Islamic Forex Trading: Brokers ensure that no interest is charged on trades. Clients pay a fixed price charge. There is also a period (typically a week) in which brokers do not apply swaps. It is only after that time has passed that a swap can be done, if a trader’s position remains open.
Stock Trading in Islamic Markets: Certain stock market indices, such as the Dow Jones Islamic Market Index is designed to include companies that adhere to Sharia guidelines.
The Future of Islamic Trading
The future of Islamic trading looks to be very promising. Global demand for ethical, Shariah-compliant financial practices are growing. According to LSEG (London Stock Exchange Group), there is an evident rise in Muslim consumers seeking investment opportunities that align with Islam, making the market for Islamic finance and trading platforms grow in turn. As Islamic finance continues to adapt to modern economic realities, we will almost definitely witness further innovation in Islamic derivatives, fintech, and sustainable investments.
Islamic brokerages offer great insight into the current and future states of Islamic trading. Meeting with Islamic brokers in person is the most reliable way to expand your knowledge on the topic. Ideally, you should meet them all under one roof, such as at an online trading expo.
Luckily, MENA’s #1 online trading expo is around the corner.
iFX EXPO Dubai 2025 brings together brokers, prop firms, traders, fintechs, regtechs, service providers, and more, for 2+ days of networking, learning, and inspirational success stories. There will be a wide range of industry companies at the expo, including 20+ brokerages that operate according to Sharia law. Best of all, iFX EXPO Dubai 2025 will feature a keynote speech on Islamic Trading at their Traders Arena, a dynamic stage for trading education and community building, specifically designed for traders.
The expo will welcome a global audience on the 14th to the 16th of January. Register now for the #1 online trading expo in the MENA region and discover the perfect brokerage for your Islamic trading needs! Best of all, it’s completely FREE for traders! Book your spot here.
REFERENCES
SHARI’AH CONCEPTS IN ISLAMIC BANKING - ProQuest. (n.d.). https://www.proquest.com/docview/1510289070?sourcetype=Scholarly%20Journals
Islamic finance: global industry on track towards projected growth. (2024, June 12). LSEG. https://www.lseg.com/en/insights/data-analytics/islamic-finance-global-industry-on-track-towards-projected-growth
