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Ruling on Propfirm's

9 hours ago by Masroor khan

Bismillah ir-Rahman ir-Raheem

Assalamu alaikum wa rahmatullahi wa barakatuh,

Respected Mufti/Sheikh,

I hope you are in the best of health and iman. I am writing to ask for a ruling (fatwa) on the permissibility of a specific "funded trading account" program, as offered by proprietary trading firms such as FundedNext, in the context of CFD (Contract for Difference) trading on stock indices such as the German DAX 40 (GER40). I would be grateful for a full explanation of the reasoning, based on Qur'an, Sunnah, and fiqh principles, rather than only a short verdict, so I can understand the basis of the ruling.

About myself and how I trade

I am a CFD trader based in Pakistan. My primary instrument is the GER40 (DAX 40) index. My approach combines fundamental analysis (macroeconomic drivers such as ECB policy decisions and major geopolitical developments) with technical structure on the 5-minute chart: I look for a Break of Structure (BOS) in the direction of the prior daily candle before entering a trade, I limit myself to one trade per day, taken during the London trading session. I am asking this question because I want to be certain that using a funded-account program to trade with more capital than I personally have is permissible, given how I trade and given the specific structure of these programs.

How the program works

  1. I pay a one-time, non-refundable fee to enter a single-phase "Challenge." This gives access to a simulated (demo) trading account with a set virtual balance.

  2. During the Challenge, I must reach a set profit target (commonly around 10% of the virtual balance) while staying within a maximum overall drawdown limit and a maximum daily loss limit, over a minimum number of trading days. There is no live-market order execution during this phase — the firm's terms state that no financial instrument is actually bought, sold, or traded on my behalf; it is a simulation on their own servers.

  3. If I pass, I am given a "FundedNext Account" — again a simulated account, not a real brokerage account funded with my own money, and not, as far as I can tell from their published terms, mirrored trade-for-trade into a live account.

  4. From this point, if my simulated trading shows profit under the ongoing rules, FundedNext pays me a "Performance Reward" — a percentage (commonly 80-90%, sometimes higher) of the simulated profit, paid as real money from the firm's own funds. If I breach the drawdown rules at any stage, I lose access to the account, and any fee already paid for the Challenge is not returned.

  5. Other conditions include identity/KYC verification, restrictions on hedging across multiple accounts, and restrictions on certain trading behaviors (e.g., latency trading, exploiting price-feed delays).

My questions

  1. Given that no real buying or selling of any Shariah-relevant asset takes place during the Challenge phase or the funded phase — since both operate on simulated accounts — what is the ruling on paying a fee to enter this kind of arrangement?

  2. Is the fee I pay for the Challenge better categorized as (a) an Ijarah (a service fee for an assessment/educational service), (b) a Ju'alah (a reward-based contract, promising a reward conditional on completing a task), (c) something else? Which category does Islamic law require this arrangement to fall under, and does the structure described above satisfy the conditions for a valid Ijarah or Ju'alah contract?

  3. Is it permissible to receive a "Performance Reward" calculated from trading activity in a simulated account, rather than from a real brokerage account trading real capital in the market? Does this differ from a genuine profit-sharing arrangement such as Mudarabah, where real capital is actually placed at risk in the market?

  4. Does the ruling differ at all between CFD trading on a stock index (such as GER40) and CFD or spot trading on currency pairs (forex), given that indices and currency pairs have different underlying structures?

I would be grateful for a clear verdict (halal / haram / makruh) along with the supporting reasoning, so I can proceed with confidence in this matter. JazakAllahu khairan for your time and guidance.

Wassalamu alaikum wa rahmatullahi wa barakatuh,

[Masroor]
Pakistan