Islamic Swap Free Account - What is Swap in Indices Trading?
In Indices, there is the payment of swaps every day; this is the interest rate of a indices trading instrument that the indices trading instrument earns per day. This interest for a indices trading instrument like the Australian Dollar is 5%, this means that every day a fraction of this five percent is paid to anyone holding this Australian Dollar.
This brings the Issue of paying and getting paid interest which is an Issue in Islamic Religion. Islamic Religion does not allow paying and getting paid interest, For Islamic indices traders there is an account designed in accordance with their Values; Known as Swap Free.
For this indices trading account a indices trader will not pay the overnight rollover interest on any indices trading instrument and will also net get paid any interest, this is also known Shariah Compliant where there is no paying of RIBA (interest) - also referred to as Islamic Accounts.
For a indices trader to get a swap free account, a indices trader has to go to a indices trading Islamic indices trading broker and select the option of “Islamic Account”, This option is provided under the Accounts Section of the indices trading broker specifying the instructions of opening one of these accounts.
Once a indices trader opens a this indices trading account, then the Indices rollover interest is removed. Once this no paying of interests is set, if a indices trader is using a trading platform such as the MT4 then the rollover fee record will be set to zero.
The rollover fee is charged daily at the end of the trading day for those holding a particular indices trading instrument for which a swap is to be applied. As a indices trader if you do not want to pay this rollover you should close your trades before the end of the day, that way you will not pay the rollover fee as you are no longer holding open indices trade. Because the indices trading market does not open on Saturday and Sunday, the rollover for these 2 day will be charged on Wednesdays, meaning on Wednesday one will pay the rollover for Wednesday, Saturday and Sunday, and therefore on Wednesdays this rollover fee is paid 3 Times.
These positions that pay a rollover interest are commonly referred to by traders as Overnight Positions. Day Traders rarely leave their trades opened overnight and close them all before the end of the day. Swing Traders on the other hand may leave their trades opened for a few days and leave these trades overnight so as to capture more movement in the indices price trend.
Once a indices trader finds a swap free indices trading broker and opens and Islamic Account, the indices trader will have the same trading conditions as those of other traders, except for the paying of rollover fees. This means a indices trader will use the MT4 Indices Trading Platform like all the other traders, the indices trader can trade all currencies, all indices, all CFDs, all metals and all other Financial Instruments provided by the indices trading Islamic broker.
However, be careful in selecting a swap free broker, some brokers will add a commission or add some pips to the spread you trade with to cover the swap(Swap Fee Broker). This is not supposed to happen as the indices trader will still be paying for the interest even though is disguised as another charge, good indices trading Brokers do not add any commission nor do they add any charge on to the spreads.
Another thing is that some brokers will charge a rollover fee if the position held by a indices trader is held for more than 5 days or more than 7 days, this should not be the case and the indices trading broker should not charge any carry over interest even if the open positions are held for more than five or seven days. For traders wanting to open this swap free Account with a indices trading Islamic indices trading broker it is good to check for any additional terms of trading for the Islamic Account that you are going to be opening to make sure that the indices trading broker you choose is really a
no swap broker.
Islamic Indices Trading Account
Swap free accounts were introduced by brokers after demand for carry over interest free accounts grew among the Islamic indices traders. The traditional trading account entailed paying of rollover interests in what is known as rollover interest. This led to the introduction of Interest Free Accounts that Islamic traders could open and still keep in line with their rules on no paying and getting paid interest.