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:. If you approach binary options trades with no strategies in place, without having conducted any testing, and without having a logical basis for your trade decisions, you are definitely gambling, which is very much haram.

But if you approach binary options trading with a systematic plan, which you have tested thoroughly and which can help you minimize your risk, you are investing like a professional. Next, there is the matter of greed.

This too is always relevant to any discussion surrounding finances. Is binary options trading inherently greedy? If you are able to trade while maintaining balance and generosity in your life, then you are not possessed by greed. If on the other hand you allow trading to totally consume you, disrupting your obligations to faith, family, friends, and community, yes, it is greedy.

Earning interest on trading positions or through any other activity is strictly banned. There are no exceptions. That means that if your broker pays you interest on overnight positions, you are earning riba through binary options trading. That makes it haram. Thankfully, there are a few binary options brokers out there that are aware of this obstacle, which all Muslim traders face.

This keeps trading halal. Whether binary options trading is halal or haram depends on where you invest and how you invest. Trading binary options is not strictly halal or haram. If, however you trade like a professional, keep greed in check, and hold an Islamic account which does not earn riba, then binary options trading can be halal.

Are Binary Options Haram or Halal for Muslim Traders?

The general consensus seems to be that binary options trading is permissible to Muslim traders. This is largely due to the fact that trading has always been a way of life for Muslims and the religion Islam has always encouraged Muslims to participate in commerce.

It is derived from the main tenets of Islam specifically from the Quran and the wise sayings and actions of Prophet Muhammad called the Hadith. Together, Shariah principles dictate the way a Muslim should live his life. Riba is the Arabic term used to describe interest and is considered one of the major sins in Islam. In an Islamic society, it is encouraged that Muslims should practice selflessness and make sacrifices especially towards those who are less fortunate in life.

For example, if a poor individual were to approach a wealthy person for a loan, the wealthy individual according to Shariah law is obligated to provide the loan to the poor individual without imposing interest on the loan. This is in direct contrast with conventional societies where the priority is on personal benefit and self-interest. The differences also apply to the Islamic banking system and to the conventional banking system. With Islamic banking, there is no interest involved.

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.

Typically, these Islamic trading accounts are characterized with all features listed below:. Answer: Many traders are Muslim and therefore brokers have come up with a way to make this kind of trading halal.

This means they do not charge interest on any positions held open. Answer: Instead Islamic banking transactions are based on 2 types of mutually beneficial arrangements called Mudharabah and Musharakah. With Mudharabah the bank enters into a profit-sharing partnership with the trader. As it is a partnership, the investor will also bear a portion of the losses. With Musharakah the profits under this arrangement are divided in accordance to the amount of capital that is contributed.

Is Binary Options Halal Or Haram? Mudharabah Arrangement 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. Musharakah Arrangement The Musharakah arrangement is similar in concept to the Mudharabah arrangement except that the roles are reversed. Binary Options Islamic Trading Account 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.

Q: If there is no interest involved what is the structure of the trade? Dev Ops.

Which means this is halal. This is were you put in the settings you want the software to use. Therefore, the followers embrace them according to that way of life. They mean nothing complicated. The terms Halal and Haram are some basic principles in Islamic teachings.

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