Forex Trading and Islam

The topic of Forex trading prohibition in Islam is vast and controversial. Many points of view exist on different aspects of on-line Forex trading including - spot trading, futures and options trading, margin trading, overnight interest, etc. The majority of the Islamic jurists agrees that Forex trading can comply with Sharia only if it is spot trading (while futures and options are considered to earn Riba) and if it doesn't involve any overnight interest (or interest hid by commissions, though Muslim traders should know that not all commissions are to hide overnight interest). One of the main point of debate lies in margin trading (almost every transaction in Forex is based on margin) and hedging (it is compared to futures trading usually). Dr. Mohammed Obaidullah of Universiti Tun Abdul Razak (located in Malaysia) discusses this topic in his article - Islamic Forex Trading. It is a well grounded article covering every aspect of Forex trading and providing references to the fundamental Islamic sources. Among other things, Dr. Mohammed Obaidullah proves margin Forex trading to be legal for Muslims, as long as it doesn't involve any Riba (unlike some other Islamic jurists who look at margin Forex trading as forbidden activity). In this articles the Forex hedging is also analysed and is seen as the source of Riba income. I strongly recommend reading this article to all Muslim traders and those who want to start trading Forex while remaining a lawful Islamic believer.