In this episode of Truth About FX, Walter discuss about Sharia Laws. He talks about the tricky things that you could get using this system and how some brokers have taken this to their advantage.
Download (Duration: 02:41 / 3.08 MB)
In This Episode:
00:33 – Sharia Laws
01:42 – holding fee
02:12 – interest rate difference
According to religion, Muslims are not allowed to pay interest. [Click To Tweet].
Why do you want an interest free account? [Click To Tweet].
Wait for the interest rate difference to go up. [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter! This is an odd question maybe but what is “Islamic forex trading”?
Walter: I believe the question is referring to Sharia Laws. Really strict Muslims are not allowed to pay interest. What happens is, according to their religion, they’re not allowed to pay interest.
What that means is you’re used to be be able to get — if this is your religion — you’re used to get an account that was interest free. Obviously, in forex, we are either paying interest or gaining interest everyday of the week.
On Wednesdays, we actually get the three days. We get the Wednesday interest plus Saturday and Sunday with most brokers. You’re literally making or paying interest every day of the week which is called the “swap”.
There are a lot of tricky things that you could do by essentially gaining the system and opening up an interest free or Sharia account or Muslim account where you’re not paying interest in one account and then you could have and trade in another account, where you’re actually gaining interest.
It’s like you’re collecting all these interests, sort of thing. That game is really starting to shut down because the brokers understand it. Even if you’re trying to get an interest free account, they’ll often charge you with things like a holding fee or something like that.
They’re not calling it “interest”, they call it something else. Maybe possible but I think it’s really difficult to find a broker who’ll literally give you an interest free account now. I think a part of the question here is why do you want an interest free account? Or, why would you want to do that?
That’s been my experience. It’s actually a pretty cool system if you know what you’re doing. In other words, you’re just collecting interests. You do when you can get a lot of interest. You wait for the interest rate difference to go up and you can collect a lot of interest over time but I think that game is kind of shut down.
Do you know anymore about that?
Hugh: No, I don’t. I just heard about it a few years ago because I have a Muslim friend. That’s pretty much all I know. It’s seems interesting though but I can see where people would take advantage of it and why they will shut that down.
Hugh: Okay, great. Thanks, Walter. See you next time.
Walter: See you.