Technological innovations have brought significant changes to the investment world, and one of the hot trends among crypto investors is crypto bot trading.
However, as Muslim investors, it is important for us to seek investment instruments or tools that comply with Shariah criteria. The question is, is crypto bot trading halal? What are the important considerations before using crypto bot trading? And various other questions. In this article, we will discuss the Shariah perspective in the context of crypto bot trading and how Muslim investors can benefit from this opportunity.
What is a Trading Bot?
A trading bot is a tool that helps investors buy and sell cryptocurrencies automatically at the right time and desired price. In other words, a trading bot is a smart trading tool that buys and sells cryptocurrencies on behalf of the investor. Trading bots are available in various crypto investment platforms, such as Bybit and Binance. It is one of the low-risk and low-return investment strategies.
One example of a trading bot is Spot Grid Trading. It is a strategy that automatically buys and sells cryptocurrencies at predetermined price intervals and ranges to build a trading grid. It is usually used in a limited range, known as a bounded range, in a highly volatile market. In simple terms, investors typically use this tool when the market is going through a sideways phase but with high volatility.
With a trading bot, investors can trade more clearly and avoid emotions when making trading decisions. Investors only need to set market conditions that trigger the buying and selling of cryptocurrencies. Then, all cryptocurrency transactions will be carried out automatically by the trading bot. The operation will also be faster.
Halal or Haram?
The use of a trading bot itself is not an issue as long as all aspects comply with Shariah principles. This is in line with the doctrine in fiqh muamalat that states:
"The primary ruling for contracts and conditions in financial dealings is permissibility (unless proven otherwise)."
As long as there are no elements or evidence that make it haram, it remains under the original ruling, which is permissible. However, if the trading bot is involved in prohibited activities such as leveraged trading, it can be considered haram. Thus, the profits obtained from such activities will also not be in line with Shariah because the trading itself does not comply with Shariah.
One way to ensure that a trading bot complies with Shariah requirements is to ensure that the bot is limited to spot trading and does not engage in margin or futures trading. Additionally, it is crucial to check that both coin or token pairs involved in the trading are Shariah-compliant.
Crypto Bot Trading Guideline
To ensure that all operations within the tools comply with Shariah principles, we will assist you in creating a checklist to identify any potential non-Shariah aspects and determine the permissibility of the tools. Please ensure the following:
- Trade only in Spot pairs.
- Avoid margin trading or leverage.
- Ensure that the coin/token is Shariah compliant.
- Only use a regulated platform or a well-known platform that offers protection under the country's securities law, which will help you avoid falling victim to fraudulent schemes.
By adhering to these guidelines, you can ensure that the crypto bot trading activities align with Shariah principles.
Conclusion
In conclusion, the use of a trading bot does not pose a Shariah issue as long as it is used for Shariah-compliant investments. Although trading bots are seen as helpful and convenient tools for investors in their buying and selling activities, as Muslim individuals, we need to be more cautious when using such tools, as they may involve us in transactions and investment instruments that are not compliant with Shariah.