Fatwa ID: 08975
Answered by Maulana Abdurrahman Persaud
Question:
I would like to request a ruling regarding people firm trading challenges. The proper fiqh analogy is wakālah bil ujrah — agency for a fee.
The firm hires the trader as an agent to trade on their behalf.
The agent (trader) is paid a performance-based commission (a share of profits).
This is a well-established structure in Islamic jurisprudence, provided:
The trader doesn’t risk his own money.
The firm bears all capital loss.
The trader’s payment is clear and contractually defined.
So, as long as the trader is acting as an agent with a clear fee structure (e.g. 80% of profit), the arrangement is halal under wakālah, not muḍārabah. In these challenges, I trade on a simulated account using virtual funds provided by the firm. There is no real trading taking place on the live market – all transactions, including swap fees, leverage, spreads, and execution delays, are simulated. Also, In wakālah, it’s perfectly valid for only one party (the principal) to contribute capital.
The agent contributes effort, expertise, and time — that’s his side of the bargain.
Classical fiqh accepts this as legitimate exchange (ujrah).
So, the idea that “both must provide something tangible” misunderstands the fiqh category.
Some argue the evaluation fee makes it impermissible because “you’re paying to access money.”
But:
You’re paying for a service (testing, data feeds, monitoring, and administrative process).
The firm provides an evaluation platform — like a professional qualification fee.
If the fee is non-refundable and disclosed upfront, it’s not maysir (gambling), because you’re not “betting” — you’re purchasing a legitimate service. No other money is staked or risked by me after this fee.
“Gharar” applies when the outcome or terms are ambiguous.
But in a prop firm:
Rules, profit split, drawdown, and payout terms are known in advance.
The trader voluntarily accepts the terms.
So, there’s no impermissible uncertainty.
The firm evaluates my trading performance according to preset rules. If I achieve their profit target within the limits of maximum daily and overall drawdown (which is not losing a certain amount of capital.) (without violating other conditions), I qualify for a profit-sharing arrangement where the firm pays me from its own funds, not from any market trading activity.
In my trading, I follow a systematic, data-driven approach based on continuous backtesting, forward testing, and journaling. My trading decisions are made only when specific price-action criteria are met, developed from my prior analysis. I use strict risk-management rules, typically risking a small, predefined percentage of the simulated balance per trade, and aiming for a clear profit target-to-risk ratio.
My question is:
Given that this setup involves simulated trading with no actual financial transaction on the market, and that my trading decisions are rule-based and risk-controlled, and that the proper anology for prop firm trading would be wakala bil ujra does this activity fall under any of the Islamic prohibitions?
Please advise whether participating in such prop firm trading challenges is permissible in islam, and if so, under what conditions.
Jazakum allahu khayran for your time and guidance.
In the name of Allah, the Most Gracious, the Most Merciful
Answer:
Proprietary trading firms, as you mentioned, in most cases use demo or simulated accounts where no real money is used on the market, where traders pay to access these simulated and fictitious accounts.
Transactions of any sort must be of things that carry real value, service, and significance on both sides of the seller and buyer. To earn an income without providing a valuable service or goods would be unlawful.[1]
Prop firm trading would be the same since it is selling fictitious and virtual accounts, which do not carry any real value.
The instruments these firms use are non-compliant to Sharia, so the fees paid are to access these unlawful instruments.
To add to the above, certain firms mirror/copy traders’ input and inform others on how to execute them in unlawful ways, and this would be I’anahtu al-ma’siyah (assisting in sins).
Sayyidunā Abū Hurayrah (Raḍiallāhu ʿanhu) reported that the Messenger of Allah ﷺ said, “Whoever calls to guidance will have a reward similar to those who follow him, without detracting from their rewards at all. Whoever calls to misguidance will have sin upon him similar to those who follow him, without detracting from their sins at all”.[2]
Taking risks is an essential part of trading in Islam. The principle of al-kharaj bi al-daman (reward is justified through liability/risk) separates the halal trading from those that are haram. Taking some amount of risk is required, but to make it risk-free would constitute riba.[2]
Categorizing prop firm trading under wakala would be inaccurate since the trader only gets paid if there is a profit, whereas in wakalah, there is a due payment to the hired person even if there is a loss.[3]
Only Allah ﷻ knows best.
Written by Maulana Abdurrahman Persaud
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham
References:
[1]
والمالُ الغيرُ المتقوَّمُ مالٌ أُمِرْنَا بإهانتِه، لكنَّهُ في غيرِ ديننا مالٌ متقوَّمٌ.
ص30 – كتاب شرح الوقاية ت أبو الحاج – باب البيع الفاسد – المكتبة الشاملة
{أَنَّ رَجُلًا ابْتَاعَ عَبْدًا فَأَقَامَ عِنْدَهُ مَا شَاءَ اللَّهُ أَنْ يُقِيمَ، ثُمَّ وَجَدَ بِهِ عَيْبًا فَخَاصَمَهُ إلَى النَّبِيِّ صَلَّى اللَّهُ عَلَيْهِ وَآلِهِ وَأَصْحَابِهِ وَسَلَّمَ فَرَدَّهُ عَلَيْهِ فَقَالَ الرَّجُلُ: يَا رَسُولَ اللَّهِ قَدْ اسْتَعْمَلَ غُلَامِي.
ص127 – كتاب الأشباه والنظائر ابن نجيم – القاعدة العاشرة الخراج بالضمان – المكتبة الشاملة
[2]
عَنْ أَبِي هُرَيْرَةَ أَنَّ رَسُولَ اللَّهِ صلى الله عليه وسلم قَالَ مَنْ دَعَا إِلَى هُدًى كَانَ لَهُ مِنَ الأَجْرِ مِثْلُ أُجُورِ مَنْ تَبِعَهُ لاَ يَنْقُصُ ذَلِكَ مِنْ أُجُورِهِمْ شَيْئًا وَمَنْ دَعَا إِلَى ضَلاَلَةٍ كَانَ عَلَيْهِ مِنَ الإِثْمِ مِثْلُ آثَامِ مَنْ تَبِعَهُ لاَ يَنْقُصُ ذَلِكَ مِنْ آثَامِهِمْ شَيْئًا
2674 صحيح مسلم كتاب العلم باب من سن سنة حسنة أو سيئة ومن دعا إلى هدى أو ضلالة
[3]
ولا تصح حتى تكون المنافع معلومة والأجرة معلومة وما جاز أن يكون ثمنا في البيع جاز أن يكون أجرة في الإجارة
ص101 – كتاب مختصر القدوري – كتاب الإجارة – المكتبة الشاملة