What is a Swap-Free Account?

What is a Swap-Free Account?

A Swap-Free Account, also known as an Islamic Account, is designed to accommodate traders who adhere to Islamic principles that prohibit the earning or paying of interest. This type of account allows you to trade without incurring any swap charges on positions held overnight, making it compliant with Shariah law.

Who is eligible for a Swap-Free Account?

Swap-Free Accounts are available exclusively to traders residing in Islamic countries and adhering to Islamic financial principles. Official proof of residency and compliance with Shariah law might be required during the account opening process.

How does a Swap-Free Account differ from a Standard Account?

A Swap-Free Account offers the same trading conditions as a Standard Account, with the primary distinction being the absence of swap charges. This means you can hold positions overnight without incurring any interest-related costs. However, please note that the spread on a Swap-Free Account may be slightly higher to cover the potential cost of removing spreads in situations where liquidity providers (LPs) cannot remove spreads entirely.

Why is the spread slightly higher on a Swap-Free Account?

The spread on a Swap-Free Account might be slightly higher compared to a Standard Account to account for situations where LPs are unable to remove spreads completely. This ensures that the brokerage can cover the cost of providing a swap-free option while preventing the misuse of the account by certain trading strategies.

Can I use any trading strategy with a Swap-Free Account?

Yes, you can use a wide range of trading strategies with a Swap-Free Account, just like you would with a Standard Account. However, please keep in mind that the slightly higher spread is in place to avoid abuse of the account, so make sure your trading strategies align with the account’s intended purpose.

How do I apply for a Swap-Free Account?

To apply for a Swap-Free Account, you’ll need to follow the regular account opening process provided by your broker. During the application, you might be required to provide official proof of residency in an Islamic country and confirm your adherence to Islamic financial principles.

Are there any additional fees associated with a Swap-Free Account?

In most cases, there are no additional fees for having a Swap-Free Account. However, as mentioned earlier, the slightly higher spread is the primary adjustment to the trading conditions in order to cover potential costs related to the removal of spreads by LPs.

Can I switch between a Swap-Free Account and a Standard Account?

Yes, some brokers might allow you to switch between a Swap-Free Account and a Standard Account based on your trading preferences. Be sure to check with your broker about their policies regarding switching between account types.

Is the Swap-Free Account available for all trading instruments?

In many cases, Swap-Free Accounts are available for a wide range of trading instruments, including forex, commodities, indices, and more. 


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