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Dirham

How Dirham Works

What is Dirham?

Dirham is a halal stock screener that filters stocks through Islamic compliance standards and identifies swing trading opportunities with statistical confidence. It answers two questions: "Is this stock halal?" and "Is this a good time to trade it?"

Halal Screening (AAOIFI Standard 59)

Every stock is screened against the AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) Standard 59 — the most widely recognized Islamic finance screening methodology.

Two financial ratios must pass:

Debt / Market Cap < 30% — The company's interest-bearing debt must be less than 30% of its total market value. This limits exposure to riba (interest).

Interest Income / Revenue < 5% — Less than 5% of the company's total revenue can come from interest-based earnings.

Companies in inherently haram industries (conventional banking, alcohol, tobacco, gambling, weapons) are excluded regardless of their financial ratios.

Purity Tiers

Instead of just pass/fail, Dirham shows how cleanly a stock passes screening:

Pure Debt < 15%, Interest < 2% — far from any threshold
Strong Debt < 25%, Interest < 3.5% — comfortably halal
Compliant Debt < 30%, Interest < 5% — meets AAOIFI thresholds

Compliance Confidence (0-100)

How far the stock is from the AAOIFI thresholds. A stock with 6% debt (limit 30%) scores much higher than one at 28%. Higher confidence means less risk of the stock drifting into non-compliance.

Board Verified vs Algo Screened

Board Verified — This stock is held by at least one major halal ETF (SPUS, HLAL, or MNZL), meaning a professional Shariah advisory board has reviewed and approved it.

Algo Screened — This stock passes our algorithmic AAOIFI screening but has not been verified by a Shariah board. The financial ratios are correct (sourced from SEC filings), but the business activity classification relies on industry codes rather than manual review.

Swing Confidence (0-100)

A statistical measure of how likely this stock is to make a 2-5% price swing in the coming week. Built from six components:

Regime Alignment (25%) — Is the stock's current volatility normal for its history? Normal volatility = predictable swings.

Swing Frequency (20%) — How often has this stock swung 2%+ per week over the last year? Measured with EWMA weighting so recent behavior counts more.

Consistency (20%) — Does the stock swing regularly, or in unpredictable bursts? Consistent swingers are more reliable.

Volume Quality (15%) — Is current volume low relative to recent history? Low-volume pullbacks revert more reliably (the selling lacks conviction).

Sector Environment (10%) — Is the stock's sector in a range-bound phase (good for swings) or a strong trend (risky for mean reversion)?

Market Regime (10%) — Overall market health. High VIX, bear market conditions, or credit stress reduce confidence across all stocks.

Entry Zone

A stock is in an "entry zone" when multiple technical signals align, suggesting a favorable moment to enter a swing trade. All of these must be true simultaneously:

1. Price is statistically depressed (Z-score below adaptive threshold)

2. Short-term momentum is oversold (RSI(2) below 10)

3. Longer-term trend is not in freefall (RSI(14) above 40)

4. Price is near a historical support level

5. Volume on the pullback is low (lack of selling conviction)

6. Swing confidence is at least 60

7. No earnings announcement within 5 trading days

The Dirham Diamond

A five-axis radar chart showing the stock's profile at a glance:

Compliance — How cleanly it passes halal screening (0-100)

Swing — Statistical swing confidence (0-100)

Value — Fundamental valuation (P/E, P/B relative to sector)

Health — Financial strength (low debt, strong cash position)

Momentum — Recent price and volume trend direction

Key Technical Metrics

Hurst Exponent — Below 0.5 means the stock is statistically mean-reverting (tends to swing back). Lower = stronger mean reversion.

OU Half-Life — How many days the stock typically takes to swing halfway back to its mean. 3-15 days is the ideal range for weekly swing trades.

ATR% — Average True Range as a percentage of price. Measures how much the stock moves daily. 1.2-5.0% is the sweet spot for swing trading.

RSI(2) — Ultra-short-term momentum. Below 10 = extremely oversold (potential entry). Above 90 = extremely overbought.

Z-Score — How many standard deviations the current price is from its 30-day mean. Negative = below average (potential entry). Positive = above average.

Decay Warning

When a stock's debt or interest ratios are trending upward quarter over quarter, Dirham flags it as "deteriorating" — the stock may be heading toward non-compliance. This gives you time to act before the stock crosses the threshold.

Market Regime

VIX — The market "fear index." Below 20 = calm. Above 25 = elevated fear. Above 30 = high stress. Swing trades are less reliable during high VIX.

S&P vs 200d — Whether the S&P 500 is above or below its 200-day moving average. Below = bear market conditions.

Breadth — Percentage of stocks above their 5-day average. Below 25% = broad selling. Above 80% = over-extended.

Data Sources

Financial statements: SEC EDGAR (official US government filings).

Stock prices: Alpaca Markets.

Halal ETF holdings: SPUS, HLAL, MNZL quarterly disclosures.

All screening ratios computed from the same source data that professional halal screeners use.

Screened using AAOIFI Standard 59. Not financial advice. Consult a qualified scholar for specific rulings.

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