Talking FOREX & Islamic Finance - Personal Thoughts

Over the past few months, I've been asked by friends, acquaintances & relatives on my thoughts on foreign exchange trading. Due to various reasons, queries on forex has increased and this i s troubling me for the following reasons:

1. Losing sight on the fundamentals:
When investing in anything, be it stocks, currencies or real estate, I always consider the fundamentals behind the asset. For example, the fundamentals behind stocks is the company itself...understanding the company itself, the management team that runs it, carrying out various forms of analysis on the financial statements etc, which generally helps to answer whether the stock of the company is a good buy or otherwise. But when it comes to foreign exchange trading, I sometimes question what is the real fundamentals behind trading in currencies? What is the investor really trading in? Once the fundamentals becomes distinctively vague, volatility increases dramatically due to high speculation.

2. Reliance on technical analysis:
Due to the vague fundamentals within foreign exchange trading, some part of foreign exchange trading relies heavily on technical analysis (as opposed to fundamental analysis). Using some formula or methodology, the hour-to-hour or certain minute-to-minute rise and fall of the market is analyzed and depending on the methodology, it is supposed to tell the investor when to buy or sell. Let me assure you that there is no winning formula or methodology. If someone offers anyone of us a prize-winning formula or so, I become very skeptic. To be honest, if I discovered a winning formula, I wouldn't share it with anyone. If I shared it or sold it, this sharing of formula saturates the market. Any advantage or arbitrage is lost rather quickly.

3. The financial market is a messy place, the forex market even messier:
The financial world is a messy place, decision-wise. Every organization, group & individual has their own formula or methodology...and since everybody makes investment decisions based upon their own methods, the reality is that the market goes up or down for various reasons...sometimes, the reason why it falls maybe clear (e.g. a recession) but there is never a complete answer, especially in what is already a volatile market in the first place.

4. Mixing forex with marketing product/group activities:
I also am guarded against mixing investment strategies, with other side incomes or marketing products. I am aware some people might share or sell their investment methods only if the person he shares it with, will participate in some group activities or marketing venture. I am not saying this is wrong or a pyramid scheme, but some of the activities I hear are too good to be true.
The methods are too vague or the returns are too high to be sustainable, especially in the global downturn that we are all facing nowadays. Sometimes, I ask, where does the person's wealth or income truly come from? Is it from forex? From the marketing or group activity? Other side incomes?

5. Forex akin to gambling:
Due to the speculative nature of foreign exchange trading, an experienced trader and ex-banker whom traded in forex once said, he doesn't trade in forex with his own money and he like an Islamic jurist and scholar that I know, clearly state it is near to gambling. Due to the volatile nature of the market (and I'm adding, the questionable 'fundamentals'), investment in foreign exchange trading (other than changing from one currency to another), is akin to a game of chance. A game of chance is basically gambling & is haram.

6. Don't follow your heart, follow your head:
This brings me to my next point, intentions. Intentions are important in Islam, as Prophet Muhammad (peace be upon him) states that 'Actions are but judged by intentions...'. I have heard numerous times from some finance-conscious individuals that the reason why they are sharing their methods or formulas are because they want to see Brunei be successful and where returns are not high enough in banks, forex trading is the answer. They further preach a good sales pitch, on how we Bruneians buy a car that is too expensive etc, which is somewhat true but I always felt that if any finance-conscious Bruneians intend to help other Bruneians succeed and profit, it's not in forex. It's too volatile and too much similar to gambling.

Why not invest in companies? If we really want to make Brunei more successful and Bruneians richer, venture into our own economy. If we have enough money, can tolerate the risk and have a good business plan/ideas, plan comprehensively and set up our own company. At least, the fundamentals is clear.

However, if one does not have enough financial knowledge (yet), seek mutual funds. There is no such thing as a passive income in forex. It requires active management & there is always potential for big gains and big losses, no matter what method you use.

7. No such thing as a free lunch & financial education:
We all must face the reality that there is no such thing as making a quick buck. There is no easy, sustainable way to earn money fast. There is no such thing as a free lunch or free advice. Making money is hard work and in many case, takes time. I'm not saying that no one has ever made money from forex, as I know some forex investors myself but they have their days, good & bad. All I'm saying is if anyone offers us something that is too good to be true, check it out first. Educate ourselves. Financial education is one of the best form of protection against pyramid schemes, questionable investment methods etc, all of which can make us regret big-time.

8. What we all don't want to end with:
What I would dread to see is Bruneians whom indulge in forex, not knowing the real issues behind forex...what makes the market go up and down...how volatile it truly is...what Islam says on forex...because at the end of the day, I dread see-ing Bruneians and friends lose their hard-earned money in some scheme and try to re-gain money in another questionable scheme, only to find the cycle compounding our losses, creating a bubble that will only burst in a bigger, disasterous way.


I leave this post, with this verse from the Qur'an, with sincere intentions for all, Bruneians or non-Bruneians, Muslims or non-Muslims to not fall for any questionable products or schemes, and be prepared with knowledge, be it financial or otherwise.

From Surah Al-Zumar (The Crowds), verse no. 9:

"Are those equal, those who know and those who do not know. It is those who are endued with understanding that receive admonition"

My thoughts. Apologies on any shortcomings.

Wassalam.

Watching the US Vice Presidential Debate

I was changing the tv channels this morning when I found myself watching the whole US Vice President Debate between Joe Biden & Sarah Palin. Aside from the interesting personalities that the two candidates projected or tried to project, it was dissappointed (though expected), as in many US political events and speeches that foreign policies are normally lop-sided where the Middle-East is brought into the picture.

I watched as is common in US politics and news that the Israel government's position is given much praise without real balance to the issues in the Middle East. The real essence of problems in the international arena and in the Middle-East in particular, is that one side is nearly always at the unfair side of the stick and without being bias (as I am a Muslim myself), it is always the Muslims in Palestine that gets less 'fairness' not only in actions but also in tv-time or politics-time. The US politics and foreign policies due to one reason or the other always flourishes the Israel government huge and sometimes unproportionate praises or support but really fails to identify or talk about the unjust that the Israel government has done to the Palestine people whether we're talking about the wall built by the Israel government, the heavy-handed attacks in Palestine etc.

It is in my opinion, it does not help either for the Palestine and Muslim cause that some individuals and even Muslims go to the extreme side of the view and project Islam as an extreme religion.

But at times, I wonder if US policy-makers and politicians had sat down with American Muslims in America, let alone other moderate Muslims in other parts of the world and try to understand the view of Muslims as to what the Israel government had and is doing to the Palestinian people. In this case, I guess the mirror reflects both ways. If any Muslim country or organization is serious in playing an international role in the pursuit of really improving Islam's image in the international arena, we should really be sitting down with the average, moderate Jews etc to ascertain their view.

It is truly sad to see that in my opinion, the OIC, the Organization of The Islamic Conferences in the public eye had not taken a strong position or real-public relations interest (in the layman's view) in improving the image of Islam in the international arena. I hope to be wrong and they may be some small to medium action plans carried out by the OIC but it is in the political, international, public-relations, news-grabbing arena that Muslim countries need to cut down the barriers of states, countries, Sunni vs. Shia etc and come to realize that when the Prophet Muhammad (peace be upon him) united all groups of Muslims during the early days of Islam such as the Muhajirin and the Ansars, it was for the sole purpose of improving human beings as a whole...that the Prophet (peace be upon him) was only sent to improve human beings 'akhlak' (moralities). There was no mention of one Muslim state against another, one sub-theological group against the other and this is where all Muslims especially the Muslim leaders need to come back...come back to the Quran and Hadith (Sayings of the Prophet) and learn, let go, improve upon whatever happened after the demise of the Prophet (pbuh).

We, Muslims, if we want to improve our own standard of living in our own country and stand as a true, united Muslim group of nations or 'Ummah' in a more general, international sense of the word must purify ourselves first as individuals. Though I don't pretend to be perfect but this time of the year, after Ramadan is the perfect opportunity to purify our thoughts and subsequently our actions. Then as a country, assist our leaders to accentuate the views of the Qur'an and Hadith as to what Islam truly entails and preaches...no more, no less. Nothing extreme, nothing compromised.

Hopefully, insya Allah (God willing), only after individuals and Muslim nations clean up shop and the OIC as a strong political body help to truly improve and project this real, moderate and practical view of Islam as revealed by the Qur'an and Hadith of the Prophet (pbuh).

Otherwise, it is in my view, that the status quo will remain and may even get worst that in the international arena, where it matters due to its ironic role in firing up Muslims' sentiments and Non-Muslims' misperception that we will, God Forbid, fail to improve our fellow Muslims' situation and continue to project an unbalanced and divided view of Islam.

I sincerely hope I am wrong in some respects in this post such as my argument on the OIC but it is simply my view, a layperson when it comes to 'International Muslim' politics (if there is such a word).
Additionally, it is not that I dislike Israel or the US as a country, but it is only certain policies or government /administration actions that I disagree as it do not help the cause of improving the international political issues that we see today.

I pray and I hope all of us regardless of religion/ belief, nation, race and background hope to improve upon the volatile nature of the world that we live in today. My apologies on the wrongdoings in this post and others.

In the spirit of Eid, I would like to wish 'Selamat Hari Raya' (Eid Mubarak) to all Muslims and to both Muslims and Non-Muslims, 'Maaf Zahir Batin' (forgiveness for any emotional and physical wrongdoings) for my posts.

Wassalam.