Best Islamic/Swap Free Forex Brokers in 2021

An Islamic account, also known as a Swap-Free account, is a trading account in which the broker cannot charge or pay an interest rate, due to laws of the Islamic faith. While brokers that offer a regular trading account charge interest on swap/rollover (also called overnight fee) on positions held open overnight, the Shariah law prohibits Muslims from trading with this type of account.

As a result, a number of brokers issued a trading account that allows Muslim as well as “non-Muslim observers of the Islamic world” to trade the markets without having to pay interest, also known as Riba. But before you choose an Islamic/Swap-Free trading account, there are a number of important factors you have to consider. Finding a reputable broker is not an easy task, particularly when you have to make sure that you find a broker that understands your needs.

Therefore, we narrowed down the list of the best Islamic/Swap-Free Forex Brokers in 2021 according to the brokers’ experience, spreads and fees, regulation status, reputation, selections of assets, unique trading features, and more.

Best Islamic/Swap-Free Forex Brokers in 2021

According to Sharia law, a Muslim is prohibited to benefit from lending money or receiving money. Furthermore, transactions in Islamic accounts must be carried out without any delay, including fees and commissions.

Bear in mind that due to the sensitivity of the matter, you might want to choose an experienced broker that operates in the industry for a long period of time. Here are our top picks for the best Islamic/Swap-Free trading platforms in 2021.

What Should You Look for in an Islamic/Swap-Free Forex Broker

As you can imagine, brokers want to find a way to compensate for the loss of the overnight fee so you want to make sure that the fee structure for an Islamic account is clear and fair. But besides the additional charges, there are other factors to consider before you open an Islamic account.

Regulation and Reputation

The most important factor to consider when choosing a broker is its regulatory framework. A regulated broker ensures that your funds are kept in segregated accounts and that the broker must comply with all of the regulator’s requirements.

But not only that, the broker’s reputation is often a key criterion when you choose to trade with a certain broker. Brokers that operate for many years and have a good reputation are obviously a better choice, particularly with the sensitive issue of Islamic principles. It’s important to note that in this guide, we have selected top-regulated experienced brokers that operate in the industry for more than a decade.

Minimum Deposit Requirement

Every broker has a different minimum initial deposit requirement. While most brokers maintain the same deposit requirement for a swap-free account as a regular trading account, some brokers have a different minimum deposit requirement for an Islamic/Swap-Free trading account.

Consequently, you will have to find out with the broker what is the initial deposit required before you can open an account. Keep in mind that there are many advantages to trade with a Swap-Free trading account, and the reduction of swaps can be quite significant in the long run.

AvaTrade, for example, maintains a minimum deposit requirement of $100 and has no added commissions for its Islamic/Swap-Free trading account.

Spreads and Commission

Principally, an Islamic/Swap-Free account should have the same trading conditions as a regular account. However, Islamic trading accounts eliminate the rollover interest rates due to the prohibition of receiving or paying an interest rate and therefore brokers charge additional fees to cover the swap rate fees.

Some brokers like AvaTrade provide an Islamic account without commissions in order to allow Muslims to join the CFD market, but most brokers charge the basic fees such as administrative and margin fees which are not part of the Islamic laws. Therefore, it’s advisable that you find out all fees and commissions before opening an account.

Leverage Ratio/Margin Requirement

Brokers are unclear when it comes to the trading conditions applied to the Islamic/Swap-Free account. The same as the initial deposit requirement, some brokers offer a lower leverage ratio for the Swap-Free account. That is due to the fact that the interest rate derives from the loan that the broker grants through margin trading. Therefore, you will have to find out the leverage ratio provided by the broker before you decide to trade with a certain broker.

Trading Platform/Social Trading

A trading platform is one of the most important features a broker can offer. Even if you are a long term position trader, you might occasionally have some same-day trades or even scalp trades. For that purpose, you want a solid trading platform with fast execution and no slippages. Furthermore, every broker offers a different type of trading experience – While Forex.com and AvaTrade offer a professional desktop trading platforms (MetaTrade4, NinjaTrader, etc), eToro is unique in that it offers a social trading platform where traders can interact with each other and share or copy trades of other members in the community.

Selection of Assets – The Sharia Law

Generally, the Sharia law does not prohibit you from buying shares of a company, ETFs, commodities, indices, or currency pairs as long as the security does not act against the principles of the Sharia law. In that sense, you might want to choose a broker that specifies the definition and activities of each tradable asset.

In fact, most brokers offer similar products, which are halal except two markets: the bond and the futures market. Another important thing to note is that indices are a collection of single stocks, and therefore, you might want to investigate each one of the companies listed on the index before you transact a certain index.

Besides the principles of the Sharia law, you also want to make sure to select a broker with a variety of markets and products. Forex.com, for instance, offers more than 4,500 products.

Conclusion

The principles of Islamic finance are laid down in the Sharia, built on the notion that money is a man-made concept that has no intrinsic value. Therefore, online brokers must adapt to customer needs. The creation of an Islamic/Swap-Free trading account ultimately allows users who comply with the Sharia law to trade the markets without any concern.

Eventually, that main difference between Islamic/Swap-Free account and a Standard account is the removal of swap (overnight) fees, which can be an advantage if you are a long-term position trader.

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