Spot trading is a way of currency exchange in which the buying and selling of assets occur at the current market rates, which are called Spot prices. In Islam, there are certain rulings on trading whether it is spot, forex or crypto. Trading is one of the fundamental components of a building society and in an Islamic household, it is necessary to know its rulings on whether trading like spot trading is halal or not.
How Does Spot Trading Work?
Before knowing anything about spot trading you must need to know what is spot trading and how it works. Spot trading is generally classified as an instant process as spot trades are generally booked within the same day, next day or spot value date known as T+2.
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What are the Spot Date and Value Date?
The spot date is the day the transaction occurs while the value date is the day on which purchased funds are released, provided the trade has been paid for.
How to Get Started with Spot Trading?
- Select a suitable website or app for trading which abides by Islamic principles.
- On the app select trading pairs.
- Place your order and please select which type of order you are going for.
- To perform spot trading, you must ensure that you are in the spot tab.
- Then, choose whether to buy or sell an asset.
- You have to enter your order value or quantity.
- Now just confirm and you are done with your order.
Is Spot Trading Halal or Haram?
It is permissible or Halal, as long as the exchange takes place in the same sitting as the contract is made. But if the deal is in the same type of currency such as selling one dollar for two dollars, then it is not permissible because then it becomes a type of “Riba” or “Sood”.
The evidence for that is the report narrated by Ubadah ibn al-Samit (May Allah be pleased with him) who said: The Messenger of Allah (Peace and blessings of Allah be upon him) said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, same for same, hand to hand. If the types are different then sell however you like, so long it is hand to hand.” [Narrated by Muslim: 1587]
Is Crypto Spot Trading Halal?
Crypto spot trading is the exchange of cryptocurrency for fiat currency or another currency by placing a buy or sell order. Crypto spot trading is considered Haram if it is not done hand-to-hand means within the same amounts. And Allah knows best.
Spot trading is a useful method for trading purposes and the best utilization or earning of money but it should be remembered that it should be done under the principles of Islam.
- Is a spot trade swap?
A forex swap transaction is a combination of a spot transaction and a forward transaction.
- Why is spot trading better?
Because it is less risky if done under rulings of Islam.
- What are the risks of spot trading?
Rapid price fluctuations.