Instead, Islamic banking transactions are based on 2 types of mutually beneficial arrangements called Mudharabah and Musharakah. In contrast to conventional banking where you have the applicable charges and interest rate explicitly stated, a Mudharabah arrangement does not have any interest involved. Basically, the bank enters into a profit-sharing partnership with the investor depositor. Because this is a partnership, the investor will also bear a portion of the losses if the investment is a failure.

In essence, it is just like any ordinary partnership deal except that it extends to the relationship between a bank and an investor. In other words, a Mudharabah arrangement allows Muslims to lend out their money in return for a profit just like conventional banks pay out interest to their depositors.

The key difference is the Mudharabah arrangement does not have the interest or charges explicitly stated like a normal arrangement. In addition, both parties to the Mudharabah arrangement share the profits and the risk of losses together. The Musharakah arrangement is similar in concept to the Mudharabah arrangement except that the roles are reversed. With the Mudharabah arrangement, the bank which enters into a joint venture with an individual or company is the investor.

The profits under this arrangement are divided in accordance to the amount of capital that is contributed. Once the loan amount has been fully paid up, the Musharakah arrangement will end between the bank and the individual. The Musharakah arrangement is usually adopted when an individual wishes to take out a mortgage to buy a property. With mortgages taken out under the Musharakah arrangement, the buyer enters in an arrangement with the bank to buy the property for a share of the rent paid by the occupier of the property which in this case is also the buyer.

Just like a normal loan agreement, the term of the partnership will be clearly defined at the start of the partnership arrangement. The idea of Islamic banking was only introduced into mainstream banking during the last decade when the UK began to adopt the concept of Islamic accounts.

The idea behind Islamic accounts was to enable Muslims to comply with Shariah law while they deal with the conventional financial banking system.

Given the fact that the growth rate for Islamic accounts is thrice as fast as traditional bank accounts, many financial services providers have also begun to adopt the idea of Islamic accounts to serve their Muslim clientele better.

Given the fact that a substantial number of financial traders are Muslim, Forex and Binary options have also started to offer Islamic trading accounts over the last years. These accounts are tailored specifically for Muslim traders and are interest-free. A Muslim trader trading with an Islamic trading account will have access to all the trading assets that other types of trading accounts have with the difference being no interest charged on overnight positions.

There is also no additional penalties or charges which Muslim traders have to pay for trading with the Islamic trading accounts. In my opinion, this is nothing but gambling. According to most of the Sunni shaiukh every Business which comes with the risk of profit and loss is Halal if it yields only profit then its haram. Trading of any kind always comes with this kind of risk so its halal as long as you dont keep your profit in savings aka pls savings acc. Where your money just sits and earns you just profit aka Ribba.

Furhtermore these sort of perdictions are made in every sort of Business now a days Wethere its trading or real-estate or buying commodities like gold etc. But we all know they rarely come true and anything can happen anytime turning your profit into loss as long as there is such a chance its halal.

Sign up to join this community. The best answers are voted up and rise to the top. Stack Overflow for Teams — Start collaborating and sharing organizational knowledge. Create a free Team Why Teams? Learn more about Teams. Is binary option trading halal?

Ask Question. Asked 5 years, 3 months ago. Modified 4 years ago. Viewed 3k times. Is this halal in Islam? halal-haram finance trading. Improve this question. edited Sep 16, at Rebecca J. Stones asked Sep 16, at user user 11 1 1 silver badge 2 2 bronze badges. There's another question about this here: Is Binary Option from an Islamic account No riba and swap-free halal or haram? Add a comment. Sorted by: Reset to default. Highest score default Date modified newest first Date created oldest first.

The short answer after my research is: Binary Options Trading is HARAM. Improve this answer. edited Nov 23, at answered Nov 17, at Aja Aja 28 2 2 bronze badges.

Trading is undoubtedly the most effective way to increase wealth. With the trading methods, we can surely earn more in profits that can be invested further. It can eventually lead to asset multiplication. However, trading is often viewed as dangerous, and people often advise against it. It is because they lack insight and knowledge for the same. Moreover, it is commonly mistaken with betting, which is not true. Trading has been there for ages and promoted by various cultures across the globe.

But, the newest way of doing it is nothing else than Binary Options. Since it is a form of online trading, misconceptions often arise. Also, a new trader might be misguided in the name of religion and culture. Binary Options is nothing but an exotic financial option. It offers only two outcomes, which makes it peculiar among other methods.

The outcomes can either end in a fixed monetary reward or nothing at all. Therefore, before coming to a verdict, we must carefully understand everything related. For example, whether a popular trading method like Binary Options is acceptable by culture or religion needs assessment. It becomes clear only after that.

Regarding the acceptability of Binary options, we often hear the term Halal or Haram. Those are typical terms for the middle eastern countries, especially.

Also, it is a fact that the GCC countries are nothing less than a hub for all types of trading. The terms Halal and Haram are some basic principles in Islamic teachings.

They mean nothing complicated. Instead, Halal translates to acceptable and Haram as not acceptable. So, they essentially depict the idea of what should not be accepted and what should be in their lifestyle. Therefore, the followers embrace them according to that way of life.

The Halal and Haram concept is not limited to activities like trading in Binary Options. However, it is commonly heard for food choices and other activities against the teachings. Halal and Haram are not strict prohibitions but should be religiously followed by those who embrace them. Moreover, what is acceptable is not formed without any justified cause.

For instance, some people believe Binary Options is Haram. They claim so because, technically, the money belongs to the company after you invest.

On top of it, the account manager makes a commission out of it. The association of Binary Options with Halal and Haram is also due to the idea that it is similar to gambling. Gambling is a method of testing luck to multiply the betted money.

Although, even in gambling, one needs to have skills to win. The Islamic teaching prohibits destructive lifestyle habits such as gambling, alcoholism, etc. As a way of life, such activities are discouraged in it. On the contrary, it intends to show a dignified path to a peaceful life. Hence, mainly because of such a mass notion, Binary trading is often classified as Haram by some. We can better understand these principles from their origin and significance.

The term draws its origin from the Arabic language. The primary source for this concept is the holy Quran, just like all other areas of Islamic teachings. It signifies what is lawful and mainly concerns Islamic dietary laws. We must have seen at food stalls written Halal instead of Haram.

That means the food served is lawful and acceptable by the strict followers. Although the focus is on food choices and lifestyle habits, the concept of Haram can be generalized. Because of that, there arises a need to scrutinize trading in Binary Options also. Halal is a contrasting term to Haram. Whatever is acceptable by the teachings of the Quran comes under it.

It is used for all such aspects of life that are not forbidden. If there is a fulfillment of the conditions, we can say that even activities like trading can fall into it. Binary Options are a modern way to trade and earn profits. But, it may not occur to many that there are demanding cultures in the world. Such cultures prefer their followers to stick to the age-old traditions. So, even a modern way to get profits and increase financial status might have to go under its judgment.

They may have to choose according to their customs. But, if the process turns out to be acceptable, then it is not less than a bonus. When it comes to acceptance by different cultures and religions, Islam is one of them. Therefore, even Binary Options has to qualify as Halal for a religious follower of Islamic teachings.

No matter how profitable and futuristic it may be. It is common knowledge that the teachings of the Quran guide the life of a good Muslim. Just like any religious practice Quran also shows the ways to live a noble life.

However, we should know that the Islamic tradition is bound with Sharia law when it comes to that. It is nothing but an Arabic word that means the followable pathway. Since Sharia law is also a personal law, it covers household, economic and financial activities, etc. We can have a deeper insight into Sharia law with its application in banking matters. Under this law, money lending is forbidden if it involves an interest rate. Therefore, investment enthusiasts were compelled to find an alternative way since no matter how noble that thought is, an economy cannot work that way.

The investments are made based on the risk-sharing concept in the Islamic world. The also include Murabahah and Musawamah. Islamic tradition cannot accept the interest rates. It is a clear fact, therefore when the law is applied to Binary Options, it calls for concern. There are interest rates charged for an overnight position in Binary trading. Since the interest rate itself is Haram, meaning even in Binary Options, it must be prohibited to make it a Halal practice. Therefore, a good Muslim who is sentimental towards the traditions can come under a dilemma while trading in Binary Options.

Since this trading method involves the interest earned or payable during a trading transaction, it makes the trade a Haram in its first impression. But traders can resolve this issue with the help of Islamic trading accounts. Any trader can feel the need for Binary Brokers in an ideological conflict such as Binary Being Haram or Halal.

Some innovative brokers have formulated the concept of Islamic trading accounts. It is an effective way to resolve this crisis.

That means it can eliminate the Riba of any form during trading. Riba means an unjust gain. Since it is the main refraining factor, Islamic trading accounts aim to solve it.

With the help of Islamic trading accounts, good Muslims worldwide can trade peacefully. They can rely on them and explore Binary Options without regret. Traders can eliminate the fear of getting involved in gambling or betting or getting a Riba. But, for the Islamic trading accounts to make Binary Trading a Halal process, it should also ensure certain parameters.

If the Binary brokers fulfill such conditions while providing the Islamic trading accounts, it can be claimed Halal. When it comes to opening an Islamic account, the trader must always ensure the trustworthiness of the brokers.

Since Binary Options is primarily an OTC trading method , brokers can play the role of the market itself.

Therefore, deciding a reliable broker needful to avoid unwanted risks such as frauds, trade manipulation, etc. Some of the best binary brokers offer Islamic trading accounts for good Muslims are as follows:. It is a relatively new broker in the Binary market.

However, despite being founded in , it has risen as a big name. The broker operates from Seychelles and is a go-to option for Islamic trading accounts. Being one of the fastest-growing binary brokers, IQ Option is not behind in offering Islamic trading account. There is no extra charge for opening and closing an account.

Moreover, traders can hold on to a position without any charges. It is a Binary broker that entered the competition in But, it is one of the prime brokers now.

If you are not allowed to use it leave this website. Gambling is a method of testing luck to multiply the betted money. Create a free Team Why Teams? It should be noted that the list above is by no means exhaustive but is just a guide. These brokers are marketing specific account types they operate as Halal and compatible with Islamic tradition and Sharia Law.

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