The benefits of the overnight trade, as we mentioned earlier, is a problem in forex trading, so how can we overcome this problem?
The first thing that comes to mind to solve this problem is to close the deal before the end of the day, so that no interest is calculated and the deal is not entered into the swap.
But this mechanism may cost you a lot. Each new deal will cost you time and a new spread (spread) commission.
The ideal solution for the trader is through the creation of the Islamic account to be able to trade without any restrictions or fears.
Thus, the account shall be free of any usurious interests.
Where the broker closes the trades at exactly five o’clock New York time and immediately after that opens the contract.
Thus, the usurious interest is avoided, and the broker in this case bears the cost of the spread for the new contract instead of its clients.
Some brokers may take charge of the so-called overnight commission, no matter how long the deal is, but within certain conditions agreed upon in advance.
This is the responsibility and account of the company and is prepared by it, and the bank has no responsibility with, as it never benefits from it.
The trading of currencies and metals in a period of 24 hours, and at 5 o’clock New York time, deals are fixed for more than 24 hours, and the interest is made on them in the regular accounts of the company every 24 hours (the company pays or takes the interest).
If the position is not closed before 5:00 pm New York time, the rollover process for open contracts will automatically occur.
The foreclosure process is the largest part of the legal problem.
Some see that the overnight commission is associated with usurious interest, because the interest rate of currencies is included in the calculation process for this commission.
What is an Islamic account for forex trading?
The Islamic account for forex trading is that account that is free of usurious interests in all its forms, regardless of the duration of the contract concluded between the two parties.
And here we mean usurious interest, that is, the interest that the trader pays to the bank in exchange for leaving the account open for the next day or for the period they want.
A transaction in the foreign exchange market may require time to close
And if the trader opens a deal and more than 24 hours have passed, and this deal is not closed before five o’clock New York time, then this deal is fixed and entered into the overnight rollover process automatically.
Consequently, it consists of an extension fee, which is in fact usurious interest that is imposed on the transaction that has been opened for a day or more.
This is known as the overnight rate or commission.
Therein lies the problem, in the incompatibility of trading operations with Islamic law.
Because these transactions are linked to usurious interests, which are prohibited by Islamic law.
This interest is included in the arithmetic process for this commission, as Sharia forbids a Muslim to take or pay any interest in exchange for the transactions he makes.
So how can a Muslim trader get rid of this problem? What is the mechanism of action for the Islamic account in forex?
A forex broker is defined as a broker who provides you with trading services, whether by providing trading programs such as forex news, technical and technical analysis of the market, or services to clients and other services.
Of course, this broker works in return for a commission that the client pays for the services rendered. This commission is known as the spread, which is the difference between the selling price and the purchase price, and the bank has absolutely nothing to do with it, unlike the swap price, which belongs to the bank.
There is another term, which is the “trading commission”.
It is a fixed commission paid once on services provided by the company for the benefit of Islamic account holders.
Such as the service of linking the client’s account with Islamic programs or to provide programs for Islamic accounts in forex trading.
Swiss fs company provides the service of the Islamic account for forex trading to trade according to Islamic law
If you are one of those traders who usually leave their accounts open until the next day, and often have to pay high rollover fees, then an Islamic forex trading account might be the perfect solution for you.
Trading cryptocurrencies such as Bitcoin, Bitcoin Cash, Ethereum and others; is not available on Islamic accounts. In order to trade cryptocurrencies, customers must give up the “Islamic account” privileges and be subject to special fees or interest.
Some foreign currency pairs (ZAR, TRY, RUB, MXN) are not available in Islamic accounts, in order to be able to trade on these pairs, clients must abandon the Islamic account which will subject them to swap fees or interest.