Direct answer
A worked example of an Islamic account shows how the account’s cost treatment changes when a position is held overnight. It does not predict market results; it only demonstrates how an interest-like component is handled under stated assumptions.
Mechanism or definition
An Islamic account (often described as an “Islamic” or “swap-free” account in forex contexts) is typically built to align with Shariah principles that avoid charging or receiving interest (riba). In practice, the provider still needs a method to reflect the economics of holding positions across time. That is why the operational detail matters more than the label.
Two stable ideas are helpful:
- Overnight holding can create a cost or credit under conventional account calculations (commonly called swaps or rollover).
- Islamic account rules replace that swap mechanic with an alternative approach, such as a separate fee, a different accrual method, or a netting rule—depending on the provider.
Because providers implement these rules differently, any “worked example” must state the assumptions clearly.
Evidence or example (fully numerical, with assumptions)
Assumptions for the example
To keep this self-contained, assume a simple scenario with no real-time prices:
- You open one position at an entry price of 1.2000.
- Position size is 10,000 units of base currency.
- You hold the position for one day and then close it.
- The conventional (non-Islamic) account would apply an overnight net cost of $5 due to the swap/rollover mechanism.
- For the Islamic account, assume the provider replaces the swap with a separate overnight fee of $5 that is charged at end of day.
- Assume no other fees (commissions are zero) and no spread or execution differences.
- Assume the trade price change over the day produces a $100 profit on the position.
Worked calculation
- Trading P/L from price movement: +$100
- Overnight component (conventional swap method): –$5
- Conventional net result would be: +$100 – $5 = +$95
- Overnight component (Islamic account alternative method): by our assumption, –$5
- Islamic net result would be: +$100 – $5 = +$95
What this example teaches
This example shows an important limitation: an Islamic account may change how the overnight component is labeled and calculated, but the economic impact can still be similar if the provider’s alternative fee equals the conventional swap cost.
If instead the provider’s Islamic rule produced a different fee, then the net result would differ. For instance, if the Islamic fee were $2 under the provider’s schedule (not assumed here), the Islamic net would be +$100 – $2 = +$98.
Limitations and risks
1) The label is not the calculation
“Islamic” or “swap-free” can mean different implementations. A worked example based on assumptions may not match a specific provider’s fee schedule, timing, or definitions.
2) Overnight is a rule, not a clock
Providers may define “overnight” based on server time, settlement conventions, or internal cutoff rules. That affects when the alternative fee is applied.
3) Costs may appear elsewhere
Even if interest-like swap is avoided, other components—such as commissions, spreads, or account-level charges—can still change the net outcome.
4) Verification depends on jurisdiction and provider documents
Because account mechanics are provider-specific and can change, readers should verify the exact rule in the provider’s account documentation (for example, the section describing Islamic account treatment, overnight charges, and timing).
Verification or next question
To independently verify a worked example for an Islamic account, compare the provider’s written rules for:
- What happens at the end-of-day/overnight cutoff
- Whether an alternative fee is charged, and how it is computed
- Whether any additional commissions or netting rules apply
A good next question to ask is: What is the provider’s exact formula or policy for the overnight amount on an Islamic account, and how is “overnight” defined in their terms?
You can then recreate a small worked example using their stated inputs, rather than relying on assumptions.