Fatwa: Is Day Trading stocks and shares gambling?

Islamic Finance Fatwa
#2

Jzk for compiling the above Fatwas, May Allah Reward all of you in both worlds

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#3

Assalamu Alaikum,

So this means if we buy a share because we think the stock price will go up, and a few days later we sell it, and we keep doing this it is halal?

Also, my company offers stock at a discount to employees on a quarterly basis. Can I keep purchasing this stock and selling it soon after I receive the shares? The intention would be just to take advantage of the employee discount on the stock purchase.

#6

Wa alaykum salaam,

Only trade with an Islamic account if the company is Shariah certified and has a Shariah advisor.

I would abstain from any leverage unless a Shariah advisor has outlined exactly how it is operating.

Allah knows best

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#7

السَّلاَمُ عَلَيْكُمْ وَرَحْمَةُ اللهِ وَبَرَكَاتُهُ
Mufti Sahab i just want to ask that if i purchased sharia compliant stock… Then it is necessary that i can sell only after that particular share will transfer on my demat account… Generally T+2 days taken by broker to transfer the share inyo demat account
So if i bought the share today which is shariah compliant and want to sell within 2 days (not intraday) that is before transferred into demat account… Then it will be permissible or not?
جزاك اللهُ خيرًا in advance.

#8

Wa alaykum salaam,

Trading before settlement is a very debated and disputed issue. I would recommend to not trade before settlement to ensure your trade is halal and that you’ve avoided the difference of opinion.

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#9

Assalamu alaikum,

So if we purchase a share on Monday, are we allowed to sell that on Wednesday or would it be Thursday? I’m not sure if there is a way to know exactly what time settlement occurs - from what I read it’s usually 2 business days.

Also, if one did not wait until settlement in the past, does one have to purify those earnings?

JazakAllah khair

#10

Continuing the discussion from Fatwa: Is Day Trading stocks and shares gambling?:

Asalamualikum mufti saab
Iam from india and I earn a lot of money in intraday trading on halal stocks which is I buy and sell on the same day is it permissible or prohibited please answer my questions if it’s prohibited I’ll leave intraday trading
Jazak allah khair

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#12

As-Salaamu 'alaykum, Mufti Faraz,

jazakAllaah khayr for the guidance on the topic.

Does the same position apply to intraday stock and share trading (scalping)?

#13

Assalaamu alaykum,

I’m currently reserved on day trading and don’t have a definitive answer. The senior scholars are against it and this is more prudent and wise to follow.

#14

Could IFG consider producing an article resource summarising and elucidating the varying respected opinions?

JazakumAllah khayr

#15

Aww Mufti Sb.

Just reading this thread and wanted to ask for some clarity. You’re detailed view above suggests that you view day trading as permissible. However, this comment suggests otherwise. Please can you clarify?

Also, what is the opinion of AAOIFI on this?

Jzk,

#16

Assalaamu alaykum,

My personal view at present is that it requires some thought and review from more scholars. Although I have my individual opinion, I would prefer senior scholars review and give more guidance on the matter.

#21

Assalam o alaikum mufti Sab,
Can share be considered as physical asset .

If it is then can we sell it whenever we want and not waiting for t+2 days.

Mufti Sab what what are the views of ulema because of which they cansider same day trading impermissible

Jazakallah khair

#22

Wa alaykum salaam,

Many scholars are of the view that selling before T+2 is not permissible because ownership is not realised.

However, I believe this issue needs further research.

#23

@Mufti_Faraz_Adam
Selam

My broker said that i become owner of a share immediately. That from the order it will become under my name. And another thing is that islamicly app (stock screener) said that it is permissible by AAOIFI

What is ur thoughts on this matter ?

Greetings,

Omar

#24

Wa alaykum salaam,

Can you get a reference from the Islamicly app on where AAOIFI have said this?

#25

@Mufti_Faraz_Adam
Selam

yes i can this is what islamicly said:
AAOIFI Shariah Standard No. 21 - Financial Paper (Shares and Bonds) talks about the rules of investment in equity of companies. Section 3/2 states “It is permissible to buy and sell shares of corporations, on a spot or deferred basis in which delay is permissible, if the activity of the corporation is permissible irrespective of its being an investment (that is, the share is acquired with the aim of profiting from it) or dealing in it (that is, with the intention of benefiting from the difference in prices).” Section 3/7 states “It is permissible to the buyer of a share to undertake transactions in it by way of sale to another and the like after the completion of the formalities of the sale and the transfer of liability to him even though the final settlement in his favour has not been made.” A combined reading of the above two sections clearly indicate that: 1. Trading of Shariah compliant shares with the intention of making a profit from the price difference is permissible 2. Taking actual possession (delivery in your digital share certificate store/wallet) is not essential as long as you have completed the formalities of becoming the owner of the share you intend to sell before selling the same. Given the above, it seems AAOIFI as well permits intraday trading of Shariah compliant shares, given you follow the conditions mentioned above.

so what do u think of this brother ?

greetings,
Omar

#26

This is not explicitly saying what is being assumed.

The main argument here is AAOIFI (and we all agree with this point) is saying that the “transfer of liability” must go to the trader - this is more than just price risk. By reading the rest of the AAOIFI Standards, it becomes very clear that AAOIFI and all scholars regard liability transfer with asset risk passing onto the trader as a result of actual or constructive possession.

This is the main area of concern against intra day trading that is the full risk of the underlying investment transferred to the trader.

This needs further discussion among scholars.

#27

@Mufti_Faraz_Adam

selam,

thanks for reply !
so i have another question.
I am actually a swing trader so my positions are ofcourse longer then 2 days.
But i do have a very strict risk management. so sometimes when i make a wrong decission my stop loss gets triggered the same or the next day. is this okay ?

greetings,
omar

#28

could you please reply brother