Assalamualaikum, Is day and swing trading in shariah compliant crypto project permissible?
Want to know views of mufti faraz and islamic finance guru or other sources you use for shariah analysis..
WS.
The difference between a day trading, swing trading or investing is simply the amount of time between the buying and selling of an asset. If you buy and sell within the same day it’s called day trading. If you hold it for a few days it’s generally referred to as swing trading. If you hold it for longer periods going to months and years then it’s investing.
With that simplified definition out the way, for a general transaction to be Shariah compliant you need to have ownership before you can sell. I am not aware of any ruling that says you need to own something for a certain period of time before you can sell. If you know otherwise please share….
Let’s say I buy a chocolate from a wholesaler and sell it from my shop on the same day. That would be a halal transaction.
What if the chocolate stays on the self for 3 days before someone buys it? It is still halal.
The same would apply if the chocolate was sold several month later. As long as the chocolate itself is halal and not out of date, it would be a halal transaction regardless of the amount of time I “held” it. The same fiqh of transaction would apply if we were talking about a digital asset instead of a chocolate in this example.
Now if we move this example to a digital world with transactions per second. Should Muslim traders and investors be held back and only allowed to sell after a days ownership? Or should Muslims adapt with the latest technology and be allowed to use sophisticated algorithms and trading bots to execute buy and sell orders within seconds? Our view is the latter for the same reasons above.
There are of course a lot of technical details around this (such as ownership etc) and entire books can be written on the topic, but our simplified overall view is yes, day trading, swing trading and using bots can be halal as long as the underlying asset is halal. It is important to note there are some disagreement between scholars on a few areas here and IFG has a great article on this including the views of Mufti Faraz Adam which you can find at https://www.islamicfinanceguru.com/articles/investment/is-day-trading-halal
You can also find some more commentary at https://forum.islamicfinanceguru.com/t/fatwa-is-day-trading-stocks-and-shares-gambling/20/8
