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Fatwa CenterTrading in Stocks without Using Leverage or Short Selling
Question
Is it permissible in Islam to trade only buy (long) positions in stocks, CFDs, and forex without using leverage or short selling, and avoiding any interest or overnight fees?Does this make the trading halal? Please clarify for all three.
Answer
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad 
is His slave and Messenger.
Trading in stocks or foreign currencies is permissible in Shariah (Islamic Law), provided that Shariah-compliant conditions are met, including:
- Investing in companies whose activities are permissible and that do not deal with Riba (interest).
- Avoiding prohibited transactions when buying and selling stocks, such as financial leverage (interest-based borrowing), short selling, and similar practices.
- When trading in currency exchange, the exchange - even if conducted virtually - must take place immediately within the same session of the contract, and it is not permissible to delay either of the two exchanged currencies.
Allah knows best.
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