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 , where a trader sells an asset that was not previously purchased.

This type of transaction is purely speculative in nature; one could say that the product being sold is borrowed, and after the price falls, the asset is purchased at a lower price and the transaction is closed.

Therefore, the ban 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

Following the decision by the Council of Ulema of the Spiritual Administration of Muslims of the Russian Federation to impose restrictions, Muslims can only open trades with leverage equal to 1:1.

Now, the volume of an opened position on Forex or another market must not exceed the amount of funds in the trader's deposit.

This means that you can only trade using your own funds, without using funds from a brokerage company.

The ban also affected stock futures, as well as transactions involving securities of companies whose activities are related to goods or activities prohibited by Sharia law, such as alcohol, pork, gambling, etc.

How will such innovations impact the market?

It cannot be said that the bans will have a significant impact on the stock market or other assets, but it will still reduce the number of short transactions.

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

How to increase profits without leverage?

If this innovation applies to you and you are accustomed to using leverage, you will have to look for an alternative option to increase your profits.

Trading cryptocurrencies can be an option, as this asset has high volatility and can be used to make good money even without using leverage or short positions.

Cryptocurrency brokers that offer 1:1 leverage allow you to open an account. This step will completely eliminate margin trading:

If you plan to carry over trades to the next day, don't forget about swap-free accounts , as Muslims are prohibited from trading on swap-accrued accounts.