When trading currencies, there are transaction costs involved. There is what we call Forex swap, which is a commission or rollover interest brokers charge to their clients when they extend their positions overnight.
For Muslim traders, they cannot pay or earn interest as it is against the Shariah law or Islamic law. To meet the trading needs of Muslim traders, most Forex brokers today offer swap-free accounts or Islamic accounts. This means they can experience trading without any interest or commission.
What are the advantages of a swap-free account?
As stated above, swap-free accounts don’t charge Muslim traders interests when they hold their positions until the next day. Therefore, the trading result will depend only on exchange rates in a particular time frame. Although Islamic accounts present better trading opportunities, it’s important to note that brokers have varying features and terms. Some brokers free their Muslim clients from interest, yet they widen their spreads or move the interest to a different kind of fee. This method is known as swap-free in disguise which is considered unethical.
How to apply for a swap-free account?
Applying for an Islamic account is not complicated. Typically, the process starts with opening a trading account with the broker of your choice. You then have to make a request that you intend to get free swap status in your account.
Bottomline
To find success trading currencies in the Forex market, you have to make trading decisions responsibly and intelligently. In the world of Forex, there are good people, as well as bad people. You have to learn to discern so you can tell who’s telling the truth, and who are only taking advantage of you.
Furthermore, in order to make the right choices, you must understand the characteristics of your account and use them to your advantage.
Also read: 3 Most Successful Forex Traders
