Make money online from forex trading with halal?

Stack of money in a suitcase
Stack of money in a suitcase

Well, here it is one of the interesting topics to discuss, where this is the most basic knowledge to become more familiar with forex. For those who are not familiar with forex, you can read the explanation in my previous posting about the understanding of forex trading.

A little lip service, this article I made with the title "Make money from forex trading with halal?". Why did I add the "?" in the post title even though it's not a question?. Yes, because of the reason until now there are still many who debate whether forex trading is halal. Even though I had read an internet article that:

Issuing the MUI fatwa (Majelis Ulama Indonesia or the Indonesian Ulema Council), precisely in the National Syari’ah Council Fatwa Number 28 / DSN-MUI / III / 2002 concerning currency buying or selling or called Al-Sharf. In this fatwa, MUI stipulates that Forex is permissible because the origins of income are very clear.

The money generated from forex is not the result of international scale betting, but it regulated globally. Besides, the seller and buyer know the transaction flow and the number of funds. Although at the time of the transaction there was no tangible item because we did it online but there was certainty about the nominal.

That way, buying and selling foreign money, even if it indirectly, still considered legal. It does not harm traders at all and there is no cheating because everything is transparent or monitored directly. Even today there are already many of the world's top regulators that overshadow (protect clients) in forex investments such as NFA, CFTC, FCA, and ASIC.

Back to the main topic of how to get money from forex trading? Where does the forex money come from?

In the forex market, there is an option between buying and selling where to get profit and get the money from changes in the price of that currency.

From this point of view, forex trading activities are actually similar to financial market transactions such as stocks. If you already have experience in stocks, then you will not experience difficulties in forex trading. However, you also can still trade forex even though there is no experience at all in other types of investments.

However, there are several striking differences between transactions on the forex market and the stock market or other markets. Foremost, forex traders can benefit both when prices go up and when prices go down.

In contrast to stocks where we can only profit if the price goes up. How can?

Yes, because in forex, it buys and sells in pairs. For example, if you buy the EUR / USD pair, i.e. buy Euros by selling US Dollars at the same time. Here, the trader predicts that the Euro will strengthen higher than the current price.

And if the analysis really materializes, then the EUR / USD price chart will go up, and the trader can get money from the forex trading he does.

Conversely, if the Trader sells EUR / USD, it means he sells Euros by buying US Dollars simultaneously. The trader does this when he expects the US Dollar to be stronger than the Euro.

If that happens, then the EUR / USD price chart will move down, and he can still get money from the trade even if the Euro exchange rate decreases.

From the discussion above you can deduce the basic concepts in getting money on forex.
Forex charts on the Android Metatrader platform
Forex charts on the Android  (Metatrader platform)

Well, below explained more about the concept of forex trading:

Currency pair

I always write every forex trading instrument in pairs, such as EUR / USD, GBP / USD or USD / JPY. Because every transaction on the forex simultaneously buys one currency and sells another currency.

In one pair, the first currency listed to the left of the "/" slash known as the base currency. Whereas the second currency on the right called counter currency.

Buy or Sell on Forex Trading

In forex trading, the most commonly used terms are: 'BUY' if you think the value of the base currency will go up and 'SELL' if you think the value of the base currency will go down.

Exchange Prices Rate

It forms prices in forex trading in international markets. These prices will be seen in the trading platform provided by the broker to a trading tool in graphical form.

For example, in MT4 / MT5 prices will appear now that displayed in real-time charts. When we open a position, the price used is the price offered. Usually, there are two, namely the bid price (BID) and the asking price (ASK).

The difference in Bid and Demand Prices

The Bid Price is the price at which you as a trader will sell the base currency, while the Ask price is the price at which the trader will buy the base currency.

Bid prices are always lower than demand, and we often refer the difference to as Spread.

Why can there be a spread? Because the difference between the two prices will be a boon for the broker or institution that mediates between the trader and the market.

We can compare this to the selling rate and the buying rate if you make a currency exchange with Money Changer.

Close Buy / Sell

After you open a position in a currency pair, you must also close the position to realize the benefits of forex trading.

This method to close a position. So: If you initially buy, to close means Close BUY while if you initially sell, to close means Close SELL.
Choose Buy or Sell in forex to get profit or loss
Choose Buy or Sell in forex to get profit or loss

We can practice real examples of the money we can get from Forex with simulations like:

For example, we are like traders who are interested and choose GBP / USD currency pairs (Pounds Sterling and US Dollars).

Well, one time, GBP / USD displayed a bid price of 1.2800 and an ask price of 1.2804. If you estimate the value of GBP will strengthen/rise, then you take BUY GBP / USD at 1.2804.

After some time, the price will change. Can move up or down. If your estimate is correct, the value of GBP / USD will go up. When you open the position, it is your chance to realize a profit in GBP / USD, for example, you close at 1.2822.

From one forex trading transaction, your profit is 1.2822 - 1.2804 = 18 Pip (Pip is the smallest price movement available in a currency).

Now, what if the price of GBP / USD is moving in a different direction, or not according to your expectations?

For example, GBP / USD to the price of 1.2775. If that happens and you close in this position, it means 1.2775 - 1.2804 = -29 Pip (that means you have lost 29 Pip).

The good news is that in forex trading you can close a position, so if you still experience a loss or commonly called "Floating Minus" you can still hope that if the price goes to the price you expect.

However, if the chart doesn't turn around, it's better to close the position or Cut Loss before you experience more losses. And if until your capital runs out, then we can call experiencing "Margin Call."

The more Pip you get from your trading results is a benefit for you. However, to shift profits in the form of pips into money, we need more calculations. For a basic calculation like this:

The pip will be how much money (dollars), depending on the number of lots and the size of the contract you are using. The lot amount is the transaction volume that you fill in the order when opening a trade position.

While we usually attach the size of the contract to the account you choose when opening an account at a forex broker.

There are three types of contracts, namely:
  • Standard Contract: 100,000 units (USD)
  • Mini contract: 10,000 units (USD)
  • Micro contract: 1,000 units (USD)
Well, the illustration of profit calculation in the previous story, assuming an order of 2 lots and using a standard contract, would be like this:

Profits = Pip Profit * Contract Size * Number of Lots

So, your profit is 18 pips * 100,000 USD * 0.2 Lot = 36 USD.

Seeing the example calculation above, it implied in your mind forex trading capital must be expensive and must reach thousands of dollars? Yes, if the smallest micro contract is one thousand dollars, then if the standard contract is even one hundred thousand dollars?

Yes, in forex it's expensive and we need big capital to get big profits in the forex, but the good news for forex trading can now be as cheap as 5 USD. How can?

Because forex brokers usually provide a facility called leverage. Leverage is a loan scheme proportionate to collateral so it can increase the purchasing power of funds owned by traders.

For example, a broker offers 500: 1 leverage, meaning that a trader with a capital of 10 USD can have a purchasing power of 5000 USD (10 USD * 500).

Here, 10 USD becomes a guarantee fund (margin) the trader must submit that to the broker.

Although later, profits adjusted proportionally to the leverage used by traders, at least the capital needed by traders to get money from forex trading can be very low.

At present, almost all trading platforms/software from brokers have done the above calculation process automatically. So, we easily know the dollar value of our profits without having to bother counting anymore. Steady!

What is important as a trader must be competent in determining open-and-closed positions?

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