The modern era witnesses a wide spread of trading activities, including buying and selling various financial assets such as stocks, currencies, commodities, and cryptocurrencies, aimed at achieving profits. With easy access to markets through modern technologies, an important question arises for Muslims regarding the legitimacy of these transactions: Is trading permissible or prohibited in Islam?
First: Regulations for trading in currencies and stocks:
Trading is considered permissible according to Shariah if it meets the following conditions and regulations:
Free from usury: Trading operations must be free from any form of usury, whether in the form of interest on accounts or when using leverage (margin trading) which requires paying interest on the loan provided by the broker.
Avoiding ambiguity and gambling: Trading decisions should be based on thorough study and analysis of assets and market conditions, not on random speculation or sheer luck. Trading based on unstudied speculation is akin to gambling, which is prohibited in Shariah.
Legitimacy of the traded asset: It is prohibited to trade shares of companies that operate in forbidden areas such as alcohol production, or dealing with usury (such as traditional usurious banks), or trading in prohibited goods and products in Islam.
Ownership of the asset (in some cases): Some scholars see the necessity of actually owning the sold asset before acting on it and selling it, especially in commodity trading. This prevents fictitious sales or selling what the seller does not own.
Transparency and clarity in contracting: Trading contracts must be characterized by complete clarity, avoiding any form of fraud, misrepresentation, or exploitation of either party.
Secondly: Cases of prohibition of trading in Islam (when is it prohibited?):
Trading is considered prohibited in the following cases:
Margin trading with usury: Using leverage (Margin Trading) if it involves borrowing at usurious interest from the trading broker.
Trading in prohibited assets: Buying and selling shares of companies that engage in activities prohibited by law or currencies that do not meet Shariah standards (if any).
Speculation based on ignorance and ambiguity: Relying on luck, unverified rumors, or making decisions without sufficient knowledge or analysis, making it a form of forbidden ambiguity.
Trading in suspicious cryptocurrencies: Dealing in cryptocurrencies that are surrounded by ambiguity regarding their nature and origins, or that are linked to fraudulent or unethical projects.
Scholars' opinions and jurisprudence councils:
The majority of contemporary scholars have permitted trading in financial markets under clear Shariah conditions and regulations, emphasizing the need to avoid usury, ambiguity, and anything that contradicts the provisions of Islamic law. Fatwa bodies and Islamic jurisprudence councils have stressed the importance of adhering to these regulations to ensure the legitimacy of trading.
Summary:
Trading itself is not prohibited; it becomes permissible if conducted in accordance with the provisions and regulations of Islamic law, and avoids clear prohibitions such as usury, ambiguity, gambling, and trading in prohibited assets. A Muslim must seek what is lawful and avoid doubts in their financial transactions.
(Quoted with modification)