Prohibition of short positions for Muslims and other features of trading taking into account Shariah laws

Islam is one of the few world religions that still strictly respect the laws set out in the basic dogmas and decisions of the councils of spiritual governance.

Shariah laws apply to almost all areas of life of believers, including stock trading.

One of the latest innovations was the ban on opening short, uncovered positions and on the use of leverage for Muslims of the Russian Federation.

That is, now believers who profess this religion in the Russian Federation will not be able to make unsecured sales transactions or trade using borrowed funds from a broker.

It should be clarified that we are only talking about unsecured short positions if the trader sells an asset that was not previously purchased.

Such an operation is purely speculative in nature; we can say that the goods being sold are borrowed, and after the price falls, the asset is bought at a cheaper price and the transaction is closed.

Therefore, the prohibition does not apply to sales transactions if a previously purchased asset is being sold, for example, you bought shares and sold these securities a few days later.

The essence of the ban on margin trading

After the Council of Ulema of the Spiritual Administration of Muslims of the Russian Federation decided to introduce restrictions, Muslims can open transactions only with a leverage equal to 1:1.

Now the volume of an opened position on Forex or other markets should not exceed the amount of funds on the trader’s deposit.

That is, you can only trade with your own funds, without attracting money from a brokerage company.

In addition, the ban also affected stock futures, as well as transactions with securities of companies whose activities are related to goods or activities prohibited by Shariah - alcohol, pig meat, gambling, etc.

How will such innovations affect the market?

It cannot be said that the bans will greatly affect the market for shares or other assets, but it will still reduce the number of sales transactions.

Which in turn will reduce supply and help support the upward trend .

How to increase profits without leverage?

If the innovation concerns you, and you are used to using leverage, then to increase profits you will have to look for an alternative option.

Such an option could be trading in cryptocurrencies, since this asset has increased volatility and you can make good money on it even without using leverage and short positions.

Cryptocurrency brokers , where you can open an account with a leverage of 1:1, this step will completely eliminate margin trading:

If you are planning to transfer trades to the next day, then do not forget about swap-free accounts , because Muslims are prohibited from trading on accounts with swap charges.