Halal Stock Investment : Day Trading

Day trading in Islam

Day trading is not permissible in Islam because you do not yet have possession of the shares when you sell them. In Islam, it is not permissible to sell something before you have taken possession of it.

There are two reasons why day trading is not permissible in Islam:

  1. The settlement date. In the United States, stocks have a two-day delay, known as the "settlement date" or "T+2." This means that it takes two days for the trade to be finalized and for the buyer to receive true ownership of the shares.
  2. Dividends. You are not entitled to dividends after the execution of the stocks. Rather, you are only entitled to the dividends after the settlement date.

For example, if you buy 100 shares of ABC on Monday, the order will be executed on Monday. However, it will take two days after the day of purchase to be settled, which takes place on Wednesday. The seller will receive his payment, and the buyer's name will be recorded as a shareholder in the company.

If there are any dividends which are paid out on Tuesday, you will not be entitled to the dividends. This indicates that you are not the true owner of the shares until Wednesday, when the order has been finalized.

Therefore, It is advised by eminent Mufties to abstain from selling stocks on the day you bought them. Rather, wait for two days after the purchase day, before selling your stocks.

Reference https://www.askimam.org/public/question_detail/47366


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