Or ‘no interest’ accounts – more common nowadays across the internet are spot forex accounts that do not levy or pay swap interest. These are often referred to as an “Islamic Account” – because Islam prohibits the levying or paying out loan interest, which a forex trade is taken to be….

If you’re a day trader, closing trades before your broker’s daily cutoff time, this problem isn’t going to arise, but occasionally there are forex systems and stategies that could benefit from this approach.

Some long-term traders will also look towards no swap interest accounts such as these for trades on pairs that have a high negative rate. (Swap interest? Rollover charges? more information here: forex swap interest).

In the past few years, the Yen carry trade, with the Japanese central bank interest rate at around 0.5% has been a viable strategy (less so now…) – but if you’re looking at trade in which you’re buying yen, this remains disadvantageous, and here the no-interest account could have an application.

But again – a lot of the forex brokers offering Islamic, or ‘no-interest’ accounts levy a daily commission in the small print – and, this being the real world – this can be more than the swap charges in the first place… So, some caution here…

If it’s not for religious reasons, best to avoid the no-interest forex account.

6 Responses to “Forex Islamic Accounts”

1. Reya says:

   January 27, 2009 at 5:02 pm

   Alpari want $10 per standard lot as a fee in a no swap account, which is a heck of a lot!

   Reply
2. Lewis Wolfe says:

   January 27, 2009 at 7:07 pm

   $10 is a lot… in theory the forex broker has to balance out the costs of a large position kept open for a long time, which is going to attract significant rollover (that they still have to pay) against the profit they’re going to make on a 10 minute trade…

   Reply
3. GregCorso says:

   January 27, 2009 at 7:45 pm

   If they didn’t charge a separate fee, a client could open accounts with two Forex brokers, one being an Islamic trading account and the other being a normal trading account that pays interest on long positions.

   As such they will take a short position with the Islamic account and a long position on the other account so that profit on one position cancels out losses on the other account but the client is left with the advantageous carry trade.

   Reply
4. Lisa says:

   January 27, 2009 at 11:06 pm

   Oanda does rollover-free trading by continuous calculation of the net interest rate by the second, over the entire 24-hour day. This removes end-of-day rollover swap

   Reply
5. Lewis Wolfe says:

   January 28, 2009 at 7:36 am

   @Lisa
   True, but as I understand it, this doesn’t get round the religious objection.

   Reply
6. Jinny says:

   January 29, 2009 at 8:57 am

   Does it have to be a flat fee if it is no interest account?

   Reply