In the world of Forex trading, balancing one’s religious beliefs with the unpredictable nature of financial markets can be quite challenging. For traders who follow the Islamic faith, the solution lies in choosing a Swap Free Forex Account, often referred to as an Islamic forex trading account. These accounts are specifically designed to align with Sharia law, which forbids interest-based transactions (Riba). By eliminating swap interest on overnight trades, these accounts serve as a model of ethical trading for Muslim investors.
In this guide, we will delve into the best swap free forex brokers that offer swap-free accounts. Additionally, we will explain what swap-free accounts are and how they function.
What is a Swap-Free or Islamic Account?
A swap-free account is a specific type of forex account designed to comply with Islamic law, which prohibits the charging or earning of interest on trades. These accounts are called no-swap accounts or rollover-free accounts.
How Does Forex Swap Work?
The forex market runs all day and night, letting people trade currencies globally, even with different time zones. Because of this setup, a forex trade can stay open for days or even weeks.
In a typical forex account, you might have to pay or receive interest on trades, depending on whether you are buying or selling and which currency pairs are involved. For instance, if you buy the EUR/USD pair, you will pay interest if you hold it open overnight because the USD is the base currency and the EUR is the counter currency. But if you sell the EUR/USD pair, you earn interest on that trade.
The interest you pay or earn varies by broker but is usually a small percentage of the trade’s total value.
No swap forex brokers cater to forex traders looking to steer clear of earning or paying interest on their trades, adhering to Islamic religious principles. In a swap-free account, any interest that would typically be charged or earned from a trade is instead designated as a commission on the account.
Commission fees on swap-free accounts are generally slightly elevated compared to standard forex accounts because the Islamic forex broker has to compensate for the lack of income from not being able to charge or earn interest on transactions.
Best Swap Free Forex Brokers List
1. XM
XM is one of the best swap-free Forex brokers that provides trading account options without any swap for all its account types. By depositing just $5, you can switch to an account without swap fees. For swap free accounts, XM offers spreads starting from 0 pips.
Starting in 2009, XM is a highly trusted global forex broker with a focus on forex and CFDs. They provide trading options in several financial markets. You can trade currencies from different countries, commodities such as gold and oil, and indices that track stock market performance. XM also allows trading in individual company stocks and digital currencies like Bitcoin.
The broker offers support for MetaTrader 4, and MetaTrader 5, as well as its proprietary trading platforms. XM operates under the oversight of multiple regulatory bodies, such as CySEC, ASIC, and IFSC.
Renowned for its competitive spreads, comprehensive educational resources, and multilingual customer support, XM caters to over 5 million clients across 196 countries. The no swap forex broker features a variety of account types and adheres to a no-requote policy.
Here are the characteristics of XM:
1. InvestinGoal recognized XM for having the best Islamic account in 2021.
2. Any type of XM account can be switched to a swap-free option.
3. The minimum deposit required for an XM swap free account is $5.
4. XM’s Islamic accounts offer spreads starting from 0 pips on both MT4 and MT5 platforms.
5. The trading conditions for swap-free XM accounts mirror those of standard accounts, with no commissions or extra markups.
6. However, trading exotic pairs is not permitted with XM Islamic accounts.
Pros of Using XM
- Variety of Account Options: XM provides different types of accounts to meet various trading needs.
- Unlimited Demo Account Use: The demo forex trading account at XM allows you to practice trading without any restrictions on time, offering a risk-free way to hone your skills.
- Extensive Educational Materials: XM offers a wealth of educational resources to help you deepen your understanding of trading and improve your strategies.
Cons of Using XM
- No Social Trading Features: XM cannot engage in social trading, so you can’t replicate the trades of others.
- Account Access Depends on Location: The types of accounts available may change based on where you live, so availability is not uniform.
- High Initial Deposit for Securities: To open an XM Shares account, you need at least $10,000, which can be a barrier for some investors.
2. eToro
eToro allows users to request the conversion of standard accounts to swap-free accounts. For no swap accounts, a minimum deposit of $1,000 is required. There are no swaps or administrative fees for compliant trading on the platform.
Founded in 2007, eToro is a global multi-asset investment platform that facilitates trading in forex, ETFs, Crypto CFDs, commodities, and stocks. The trusted no swap forex broker features a proprietary web and mobile platform that includes social trading capabilities.
eToro is regulated by several authorities, including the FCA, ASIC, and CySEC. The platform is recognized for its user-friendly design, copy trading options and commission-free stock trading. With over 30 million users globally, eToro is led by CEO and co-founder Yoni Assia.
The characteristics of eToro are outlined below:
1. The eToro standard account can be changed to a swap-free account upon request.
2. To finalize the Islamic account process, eToro mandates a minimum deposit of at least $1,000.
3. The spread on forex with eToro begins at 1 pip, although it may rise when trading on Islamic accounts.
4. eToro will not impose any swap or administrative fees on an open position lasting over 24 hours, ensuring it remains halal.
5. Certain cryptocurrencies and other assets on eToro might have restrictions for you based on swap-free trading conditions.
Benefits of eToro
- Excellent copy trading and social trading functionalities.
- A diverse array of asset categories.
- It enables the purchase of fractional shares starting at $10.
Drawbacks of eToro
- The spreads on eToro may be considerable.
- Provides exclusively USD accounts.
- Moving cryptocurrencies to different platforms can be challenging.
3. AvaTrade
AvaTrade is a famous, best swap free Forex broker that offers Sharia-compliant or overnight fee-free trading accounts. They provide swap-free trading accounts suitable for Islamic traders, requiring a minimum deposit of $100 to get started. However, certain currencies and cryptocurrencies are not available for trading.
Established in 2006 and headquartered in Dublin, Ireland, AvaTrade is a global broker specializing in forex and CFDs. It enables trading in a wide range of markets, including currencies, commodities, indices, stocks, bonds, ETFs, and cryptocurrencies. Traders have access to AvaTrade’s proprietary platforms as well as MetaTrader 4 and 5.
This no swap forex broker is regulated by authorities like CySEC, ASIC, and FSA, which ensures adherence to fair and secure trading practices. Serving over 300,000 clients worldwide, AvaTrade is recognized for its competitive trading conditions and a wealth of educational resources.
The characteristics of AvaTrade are outlined below:
1. AvaTrade provides Islamic traders with the option to trade using accounts that are free from swaps.
2. AvaTrade requires a minimum deposit of $100 to establish accounts, which also holds for swap-free accounts.
3. Forex trading on AvaTrade Islamic accounts involves higher spreads.
4. AvaTrade does not charge any fees for maintaining open positions over multiple consecutive days.
5. Cryptocurrencies, as well as ZAR, TRY, RUB, and MXN forex pairs, cannot be traded swap-free with AvaTrade.
Benefits of AvaTrade
- Competitive fixed spreads start at 0.6 pips (0.9 pips for retail clients)
- User-friendly mobile applications
- Integration with ZuluTrade and Duplitrade
Drawbacks of AvaTrade
- Elevated inactivity fees
- Demo account access is restricted to 30 days
4. FBS
FBS enables swap-free trading on the majority of its accounts and requires only a minimal deposit to get started. For positions held beyond two days, FBS implements a fixed fee.
Established in 2009, FBS is a worldwide forex and CFD broker that facilitates trading in currencies, commodities, indices, stocks, and cryptocurrencies. FBS operates under the regulation of multiple authorities, such as CySEC, ASIC, and IFSC, and serves a client base exceeding 27 million individuals in over 150 countries.
This swap free broker is recognized for its low minimum deposit requirements, comprehensive educational resources, and copy trading options.
Here are the features of FBS for you to know about:
1. Most FBS accounts, except the ECN and Crypto accounts, allow trading without paying swap fees, so you don’t incur extra costs for keeping trades open overnight.
2. To get a swap free account with FBS, you only need to make the minimum deposit required for that specific account type. This option supports trading under Islamic principles.
3. FBS offers very low spreads, starting from 0 pips, on both standard and swap free accounts, which helps keep your trading expenses down.
4. If you keep a position open for more than two days, FBS charges a fixed administration fee based on how many days the trade is open. This fee structure remains compliant with halal trading practices.
5. However, the swap-free option is not available if you’re trading forex exotic pairs, indices, energy products, or cryptocurrencies with FBS.
Benefits of FBS
- Low minimum deposit requirement
- Intuitive trading platforms
- Recipient of 90 international awards
Drawbacks of FBS
- Limited range of financial instruments
5. Octa
Octa offers swap-free choices across all account types. Octa necessitates deposits that reflect the selected account type. Octa as one of the top rated no swap broker applies a set fee rather than interest to adhere to Islamic regulations.
Octa, previously referred to as OctaFX is an international forex and CFD broker established in 2011. Octa provides trading services for currencies, commodities, indices, stocks, and cryptocurrencies via MetaTrader 4, MetaTrader 5, and its platforms.
Octa is overseen by various regulatory bodies, including CySEC. Octa is recognized for its attractive spreads, comprehensive educational materials, and copy-trading offerings. Octa provides services to clients in more than 100 countries across the globe.
Here are the features offered by Octa:
1. Octa offers no swap accounts for all trading solutions, so you can choose an Islamic option regardless of the account type you prefer.
2. The minimum deposit for opening an Islamic account varies based on the type of account you select, aligning with the specific requirements of that account.
3. When trading forex with swap-free options at Octa, the spreads start at 0.2 pips and stay consistent, allowing you to trade without changes in spreads even with swap-free accounts.
4. Octa imposes a fixed fee for using swap-free accounts, which is considered halal as it does not constitute interest, thereby adhering to Islamic finance principles.
5. Be aware that certain assets, such as those in the crypto market, are not available with swap-free options at Octa, indicating that some investments do not qualify for this setup.
Benefits of Octa
- Affordable Trading Fees
- Comprehensive Educational Materials
- Diverse Trading Platforms
Drawbacks of Octa
- Narrow Asset Selection
- Absence of VIP Discounts
- Limitations on High-Frequency Trading
Why are Islamic Accounts Swap Free?
The Islamic faith prohibits the collection or payment of interest on transactions, which is why forex brokers that provide swap-free accounts do not charge or earn interest on trades. Instead, they implement a commission on trades to compensate for the revenue lost from the inability to charge interest.
Swap-free accounts are tailored for forex traders who wish to comply with Islamic principles regarding interest.
Although not every forex broker offers swap-free accounts, an increasing number are providing this option to meet the demands of Muslim forex traders.
How to Choose a Trusted Swap-Free Broker?
When selecting a trusted and reliable no swap forex broker, there are several factors you must take into account. Here are a few suggestions for selecting a swap-free account:
1. Verify the Broker’s Rating
It is essential to confirm the rating of the forex broker you are considering. Numerous websites evaluate forex brokers, allowing you to verify the reputation of the broker you are thinking about.
In general, it’s advisable to choose brokers that have a rating of 4 or 5. You can additionally verify whether the broker is overseen by a respected financial authority like the Financial Conduct Authority (FCA) in the UK or the Commodity Futures Trading Commission (CFTC) in the US.
2. Evaluate Commissions and Charges
When engaging in forex trading, it’s important to recognize the commissions and fees that your broker may impose. Certain brokers impose a commission on every trade, while others have a set fee.
Certain forex brokers impose a “swap” fee, which is applied when a position is held overnight. If you intend to maintain positions for extended durations, it’s essential to verify that the broker you choose does not have excessively high swap fees.
3. Importance of Speed in Forex Trading
In forex trading, acting quickly is essential. Make sure your trades happen swiftly and at the price you want. Delays from brokers can lead to losing money.
4. Seek Out Additional Services
When choosing a swap free forex broker, look for one that provides useful extras like educational tools, market analysis, and trading signals. These resources can be particularly helpful if you’re just starting in forex trading.
5. Evaluate the Minimum Deposit Requirement
Forex brokers usually have a minimum deposit requirement to begin trading, which might be $500, $1,000, or more. If your budget is tight, it’s crucial to find a broker with a lower minimum deposit.
6. A Demo Account is Beneficial
When selecting a forex broker without swap fees, choosing one that provides a demo account is highly advantageous. A demo account enables you to engage in real forex trading without the risk of losing any capital. This is an excellent opportunity to evaluate a broker and determine if they align with your trading needs.
7. Examine the Limitations
Certain Islamic accounts may restrict trading in specific assets such as commodities, stocks, or indices. Ensure that you can access the markets you wish to trade.
8. Assess Customer Support and Reviews
Seek brokers that offer prompt customer service and have received favourable reviews regarding their swap-free options. This will contribute to a seamless trading experience.