The Sharia Compliancy Rating (also known as the SCR score) is a way of measuring how much of a Trading Engine or Trading System is Shariah Compliant. The value is returned as a SCR percentage. The higher the Rating, the more Shariah Compliant the System is.
The Shariah Compliancy Rating (SCR) was created by Br. Moyn to assess and determine whether a Trading Engine or Trading System is Shariah Compliant and whether the income generated would be considered Halal.
The rating takes into consideration the 13 defining attributes of what makes any Trading Engine or Trading System Islamic.
The 13 defining Attributes & characteristics for Shariah Compliancy are listed below:
- Trading with an Islamic Account to completely remove Interest (riba)
- Removing Gambling (maysir)
- Reducing Guessing & Uncertainty (gharar) .
- Managing Greed.
- Minimising Speculation.
- Providing Trade Tracking with Trade Verification – this removes gambling & uncertainty.
- Risk Tracking with comprehensive Risk Management – removes gambling.
- Loss Tracking & Loss Management – protects the Traders Capital.
- Applying Muslim Traders Psychology.
- Integrating a Muslim Traders Lifestyle.
- Using a Shariah Compliant Trading System – Bounce Action and the MATHS Trading System.
- Traded by qualified & experienced Traders – Bounce Action Certified Traders.
- Using an Islamic Brokerage Service – provides Halal solution for intrinsic Sharia issue such as Leverage & Ownership of Assets.
If all 13 conditions are met by any Trading Engine or Trading System, then of course, it would be 100% Shariah Compliant.
Shariah Compliant Ratings
A Shariah Compliancy Rating (SCR) of less than 30% would mean the Trading System is not suitable for Islamic Trading and the income generated from such a System would be highly questionable as elements of Gambling, Guessing, Greed & excessive Uncertainty & Speculation would account for a large portion of the profits. This Trading System is NOT Islamic.
A Shariah Compliancy Rating (SCR) of 30% to 50% would mean the Trading System is not suitable for Islamic Trading, and would require additional Trade verification before placing Trades and better Risk Management. The income from such a system would be on the borderline as some income could have been generated from Gambling, Guessing, Uncertainty, Greed & Speculation. This Trading System is also NOT Islamic.
A Shariah Compliancy Rating (SCR) of 50% to 70% would mean the Trading System is suitable for Islamic Trading and suitable for placing trades confidently. The income from this system should be considered Halal. This Trading System can be considered Shariah Compliant.
A Shariah Compliancy Rating (SCR) of more than 70% would mean the Trading System is excellent for Islamic Trading and suitable for placing trades confidently. The income from this system should be considered Halal. This Trading System can be considered Shariah Compliant.
What is the Sharia Compliancy Rating of Price Action Trading?
Price Action Trading uses the Price Action Trading Engine. Many Trading systems have been developed that uses the Price Action Framework of Support, Resistance, Fibonacci Levels and Candlestick Analysis to determine Trade Direction and price movement.
Price Action was never designed with Sharia Compliancy in mind. Hence you would not expect a very high SCR Rating.
However, there are many good Trading Systems developed to use the Price Action Trading Engine, and they produce excellent trades. Price Action Trading undoubtedly works, but it can not meet the high standards required for Islamic FOREX.
Price Action fulfils the following attributes:
- Trading with an Islamic Account to completely remove Interest (riba)
- Removing Gambling (maysir) – a good trading system can do that.
- Reducing Guessing & Uncertainty (gharar) – a good trading system can do that..
- Managing Greed – a good trading system can do that..
- Minimising Speculation – a good trading system can do that.
Price Action can not provide adequate Trade Tracking with Trade Verification to ensure trades are working as expected.
Price Action does not provide any form of Risk Tracking or Loss Tracking. Price Action offers the usual Risk-to-Reward Ratio, where you either win the Trade or loss the Trade. This is evident from the fact that more than 90% of Price Action Traders lose money!
In summary, Price Action only fulfils attributes 1 to 5, giving it a Shariah Compliancy Rating of 39%.
Thus Price Action Trading is NOT suitable for Islamic Trading. The income generated from Price Action Trading is on the Borderline, as elements of Speculation, Gambling, Greed, Guessing & Uncertainty are involved. Better managing these attributes would help make the income more Halal.
In comparison, Bounce Action Trading with the MATHS Trading System achieves a Shariah Compliancy Rating of 92%.
