How Does Forex Trading in Malaysia Work

Malaysia is a stable and fast-growing economy that has a history of struggle with the Forex market. A few decades ago, when the Malaysian economy wasn’t that stable, the Malaysian ringgit attracted traders primarily because of its volatility. As you might’ve guessed, a massive surge of exchanges with MYR as a quote currency lead to significant exchange course fluctuations, and these didn’t make the government happy at all. As a result, several legal restrictions were passed, including the Exchange Control Act of 1953, which’s still in force today. These efforts were directed towards keeping the Forex market regulated enough not to harm the national currency and accessible enough to attract investments and stimulate trading activity. And luckily for all citizens of Malaysia, it worked out well!

Currently, the Malaysian Forex market is one of the most active ones, and its daily trading volume exceeds $5 trillion. It’s thriving and evolving to allow all the citizens to benefit from Forex trading in Malaysia without offending against their religious norms. It is a big deal because many of the commercial aspects of the modern world are at odds with Sharia law. Yet Forex brokers have solved this problem, and this solution is now working perfectly for all Malaysians.

Islamic Accounts and Trading

Forex trading under Muslim Sharia Law is a bit tricky. Sharia Law says that one cannot take interest on loans or participate in an activity that involves paying or receiving such interest. It also says that the money between two parties should exchange hands at the time of the deal, in one “sitting,” so to speak. Both of these are quite hard to do nowadays.

The overwhelming majority of Forex deals involve overseas transfers, and it’s impossible to physically give money to another person who’s thousands of miles away from you, on the other side of the world. It’s even more complicated because entering a position on the Forex market doesn’t mean physical possession of the currency. So a special conference was called to figure this out, and it was decided that it’s impossible to stay off from Internet trading in the modern world, but it’s still possible to close deals fast. Hence the first peculiarity of Islamic accounts: it’s usual to offer the fastest closing of contracts to Muslims.

Another thing that Islam prohibits is taking an interest, and unfortunately, swap is considered as interest paid by a trader on his position if it remains open overnight. That’s why Islamic accounts have a feature they’re most prominent for: they have no swap fees. That’s right, if you have an Islamic account, you can keep your position open as long as you want, and your funds won’t be eaten out by fees, as it would’ve happened to anyone with a regular account. But, of course, Forex brokers don’t do that out of the kindness of their hearts. Swap is one of their primary sources of income, and since Islamic accounts do not bring in swap fees – they have slightly higher commissions to compensate for them.

The last thing for you to know is that trading with leverage is also prohibited. When you trade with leverage, a broker isn’t receiving interest in the basic meaning of this word, yet if you trade successfully – the trader benefits as much as you do. According to Sharia law, his benefits consist of Riba. This aspect might be looked upon differently by various people, and the discussions are still vigorous regarding Riba itself and its nature. Therefore, you’d better consult with your spiritual leader before trading with leverage or, on the contrary, refraining from it.

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Mark Meets
Mark Meets
MarkMeets Media is British-based online news magazine covering showbiz, music, tv and movies
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