I’ve started trying to learn about the stock market recently and had a question regarding taking advantage of volatility in Shares. My scenarios are based on the assumption that I’ve first ascertained that the share is halal. Please could I have your opinion on whether the following two scenarios are halal?
Scenario A:
I own shares in company A and I intend to hold for the long term, I notice that the shares are generally on an upward trajectory but will occasionally pullback before making a further move upwards. Is it permissible to sell when I feel the share price is near the bottom of the current pullback and buy back in when it settles and starts to head back upwards?
Scenario B:
I don’t own shares of company B and may not hold long term but notice that the stock is the ‘stock of the month’ and heading upwards in price, is it permissible to buy and ride the hype before selling when it runs out of steam?
I ask these questions not as someone intending to day trade or even use these approaches regularly as I don’t have the risk appetite or ability to understand technical analysis of daily share price movements etc… but more as someone trying to understand what the distinction is between trading and investing from an Islamic Perspective and whether trading in the manner mentioned above is permissible.
Hope the questions are clear, thank you for your time.
May Allah bless you.
Both scenarios are valid from a shariah perspective. However, you have to ensure that when you sell shares, you have taken the ownership and possession of the shares.
Speculation in the stock exchange is not haram from a shariah perspective, but its not ethical either, as it can have some serious negative consequences on the market (for which some scholars may see speculation as impermissible).
Nevertheless, whether you are trading for investment or speculation purposes, the shariah rules related to trading must be observed.
Assalam alaikum, mufti Sab if a share price is going up because of a big billionaire invested in this company or last quarter results were good , can I buy that share and sell whenever I get good profit??
I am not seeing the market trend or anything, just a billionaire invested in the company , I want to use that hype to get some profit.
If the speculation is not ethical, does this mean that we cannot buy the stocks due to price swings?, usually here the analysts use the historical data to predict future price of the stocks?, though stock is shariah compliant and I can sell only the stock after owing for atleast T+2 but I would have bought the stocks due to price swings on analysts prediction of future price and bit of speculation.
Without having to go into a long discussion around the subject, there is one thing we should understand.
There are things that are deemed permissible i.e. halal, without it being necessary ‘ethical’ or ‘morally right’.
Speculation may fall under this category, where if a person observes all the shariah paramètres around trading, the fact that he may have an agressive speculative approach, may not mean it is ethically right.
Now to what level can we consider speculation as ethically acceptable or not? this is a question for economists and market specialists to answer.