Is leverage Halal or Haram in Islam?

- The broker reserves the borrowed amount.
- It prevents the trader from making any transactions (Trades) with other brokers.
- The trader is charged a commission called (overnight) if he does not close the trade on the same day.
- The broker does not allow the trader to lose more than the available margin to guarantee their funds.
Is leverage Haram?
Because of its nature, as we mentioned earlier, leverage is Haram in Islam for several reasons:- A leveraged loan is interest-based.
- This loan leads to a benefit to the lender (the broker) because of the restrictions it imposes.
- A loan that leads to a benefit is an interest-based loan (Riba). And Riba is Haram in Islamic law.
- This type of trading is considered trading with restrictions, meaning that the trader does not trade according to what he wants.
- The (overnight) fee that is charged is a conditional interest that the trader must pay in case he keeps his position open to the next day.
- Leverage is also based on the principle of a mortgage in which the trader is obligated to keep contracts with the broker in exchange for a sum of money that he borrows from the broker.
- The broker has the right to sell these contracts whenever he wants, in case the trader's losses reach the original margin amount.
If you trade in the stocks of companies that depend in their financial transactions on the principle of Riba, then their capital is forbidden according to Islamic Sharia, and therefore trading in them is also Haram. Leverage is based entirely on the principle of Riba, and Riba has been prohibited in Islamic Sharia with an explicit text in the Holy Qur’an:
( يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبا إِنْ كُنْتُمْ مُؤْمِنِينَ * فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُؤُوسُ أَمْوَالِكُمْ لا تَظْلِمُونَ وَلا تُظْلَمُونَ ) البقرة 278،279 . In Islamic law, many pieces of evidence prove the prohibition of trading from financial leverage, especially since one of the most important conditions for financial leverage is that all buying and selling operations take place through an intermediary, and this leads to a combination of selling and debt, and this is prohibited by Sharia according to the text of the hadith of the Prophet, peace and blessings be upon him. ..."لا يحل سلف وبيع"
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