Forex Prop Firm Accounts

Everyday Islamic Finance Islamic Finance Companies/Products
#1

Assalamulaikum wa rahmatullah wa barakatuh, hope all is well

After months of research and back & forth I believe “Prop Firm Trading” to be halal, but I have not jumped into it fully as I’d like one final discussion.

Now, the general consensus is that Normal Forex Trading is Haraam. I agree.

The use of CFDs where you don’t own the asset, potential Riba, etc etc would make this a grey area/ haraam. It’s best to be avoided.

HOWEVER, Prop Firm Trading and Normal Forex Trading are two different things. In summary, a trader will pay a Prop Firm a fee to take a challenge in order to trade with a certain amount of “capital” (money) given by the Prop Firm. They will test the trader to make a certain amount of profit and if successful they will be able to trade and make profit on, for example a $100,000 account. The “profits” are then split between the Trader and Prop Firm.

But understand this, and this is where my argument stands:

  1. All accounts given by the Prop Firm are DEMO accounts. You would not be trading REAL MONEY. All Prop Firms say this.
  2. You are not trading on the LIVE markets therefore you are not engaging in CFDs, Leverage, etc etc with a broker. The market conditions are simply simulated.
  3. The “profit split” is not real profit. Stats show that 99% of traders who pay for these challenges fail. If they win, only an excruciatingly small percentage even get to the first payout. Prop Firms make MILLIONS as everyone is trying to get rich quick but keep paying for multiple challenges and failing them. Prop Firms pay successful traders from this revenue.

So, if I’m not trading real money and profits are coming from revenue and not the actual markets, where is the haraam?

Well there are some other arguments people put forward:

A) “Prop Firms copy your trades and this is assisting in evil.” In the Quran it says “…Each soul is responsible for its own actions; no soul will bear the burden of another…” 6:164 - If I’m trading in what’s seemingly a halal method and the prop firm use my expertise to do what’s haraam, why would I bare the sins of what they do?

B) “Prop Firms copy our trades and pay us from this”. This is not the business model of Prop Firms. The ratio of money made from failed challenges in comparison to copying profitable traders doesn’t match up; they make waaaay more from the failed challenges. This would also mean that prop firms would need to actually risk upwards of $50,000 to give a seemingly profitable trader a real account.

It’s like making money from a game. Skilled streamers make money from a virtual game like Fifa, Call of Duty, etc.

Would like to hear ur thoughts

2 Likes
#3

“And aid one another in devotion to your Lord in every good and godfearingness, and do not aid one another in sin and transgression.” [Quran, 5:2]

#5

I passed the evaluation stage and currently in Acceleration stage (projected to be making around $10K, the next stage is Pro stage, projected to make around $40K -$100K per month, as side income. I trade only 30 mins on weekdays - so easy for me to pass, typically 3 days). But I am not convinced that it is Halal, so I withdrew my account.

“Please be advised that we only provides services of simulated trading and educational tools for traders and never directly passes any orders to the market. We use liquidity providers to supply us with price data of individual instruments in order to simulate live financial markets. All instruments that are available in your trading platform are CFD derivatives of the futures underlying assets.”

This is what I got when I asked.

The pay-out money they claimed from CFD liquidity brokers and shared with traders is it halal? Because the CFD liquidity providers are like gambling companies that provide payments to winners and collect from losers in guessing the outcomes of matches? You can buy jerseys, sport items and profits from it but if you bet on the outcome, it should be halal. This is the best similitude of the CFD brokers. They dont trade markets, they just aggregate winners and losers balance and pay the winners part of it. In my opinion, they are gambling companies attached to the financial markets. They use the data from the market to set up game for traders and profits from it. They do not buy or sell anything.

They do not create any values, they just make easy money from losers. That’s all.

You can read my back & forth with them (bottom up better).

I didnt even know that it was CFD to begin with. I saw CFD in their disclaimer only on the day I passed to Acceleration stage.

You can read my back & forth questions here.

Hi,

CFDs Liquidity providers are the counter party and they earn when you lose or they pay out when you win. This is not different as liquidity providers in FX or Indices or Futures. They charge a spread same as market makers does so in case they have to pay the winners and collect the losing positions then they earn on the spreads. The only different with CFDs are that they are all based on the prices only of all asset classes and nobody need to have the underling assets what give the LPs the options to give high leverage and this accounts are only for speculation purposes.

Assigned agent:
PREVIOUS MESSAGES:
I wrote:

Hi ,

Thank you for your patience. Well appreciated.

I will try to study more on CFDs, hopefully I am able to understand that
last part.

Thank you.

Mon, 7/8/2024, 7:01 AM UTC
Agent wrote:

Hi,

We are support team that can help you with our program rules questions or issues
but we are not here to educated if you have no knowledge what CFDs are. We can
offer you our one on one mentor program they can educate you on CFDs or anything
else you need to know about how to trade CFDs or what are CFDs:

Assigned Agent

Mon, 7/8/2024, 6:38 AM UTC
I wrote:

Hi,

Thank you for your response. Apologies for many questions. It is
clearer to me now but I don’t understand number 1.

  1. CFDs are only based on the price movements so nobody owns any underlying
    assets.

Then, what are we buying/selling, what are we profiting on? While would the
CFDs liquidity providers pay out when there are no assets? Quite confusing
for me.

Thank you.

Mon, 7/8/2024, 6:30 AM UTC
Assigned Agent wrote:

Hi,

  1. CFDs are only based on the price movements so nobody owns any underling
    assets.

  2. CFDs are executed instantly as long the markets are open and their only
    charged interest when you leaf your positions open overnight and the weekend.

  3. In the real money live accounts we takes all the losses and not the trader.

Assigned Agent

Mon, 7/8/2024, 5:50 AM UTC
I wrote:

Hi Mike,

Thank you for your swift responses. Still more, and my apologies. I really
want to know clearly.

  1. At the time of you placing my trades to CFDs liquidity providers, the
    assets belong to me or you or jointly owned or none? Or is the ownership
    at the time the providers transmit to the market? I am comparing it to
    stocks, when I buy it is mine, when I close my position, not mine anymore.

  2. I usually trade short time (less than 1 hr). Is there longer time
    between my trades and when they are transmitted, any interest incurred?

  3. For losing trades, do you incur losses as well as when I make profits
    in the profit-sharing arrangement? I am thinking like in a partnership we
    share profits and share the losses. Or you claim/place the
    cumulative profit trades only?

Thank you very much for your patience to respond to my several questions.

Thank you.

Sun, 7/7/2024, 11:53 PM UTC
Assigned Agent wrote:

Hi,

We place your trades by CFDs liquidity providers and they pay-out the profits of your trades.

Assigned Agent

Sun, 7/7/2024, 2:17 PM UTC
I wrote:**

Hi, I need some more clarifications. If “all instruments that are
available in your trading platform are CFD derivatives of the futures
underlying assets”, how then do I or you make profits that is shared? At
what stage are the trades transmitted to the market?

Thank you

Sun, 7/7/2024, 2:11 PM UTC
Assigned Agent wrote:

Hi,

We only offer CFDs on stock prices.

Assigned Agent

Tue, 7/2/2024, 6:40 AM UTC
Agent wrote:

Thank you for your email. Your ticket has been assigned to one of our departments. We’ll reply as soon as we can. We’re currently experiencing high ticket traffic, so it can take between 24-48 hours before we’ll get back to you. Thank you for your patience!

Your case number is QCZUF8.

Tue, 7/2/2024, 6:35 AM UTC
I wrote:**

Message: Hi, are Stocks Allowed or you provide ONLY CFDs of the assets? Thank you.