Definition
A handle is the whole number part of a price quote, which is located to the left of the decimal point. For example, in a stock price of $56.25, the handle is $56. In the foreign exchange market, if the price quote has a bid of 1.4183 and an ask of 1.4185, the handle would be 1.41, which reflects the common decimal portion of both the bid and the ask.
This portion of the quote is used to convey the general price level of a security or index, and traders often discuss how many handles a price has changed.
| Handle |
Stem |
| Whole number part (left of decimal) |
Fractional part (right of decimal) |
Examples
-
Stock Price Quote: $45.67
-
Forex Bid/Ask Example: 1.2300 (1.2295 bid, 1.2305 ask)
- Quoted Price: The price at which an asset, security, or currency is being traded.
- Pip: In forex, the smallest price move that can occur with a currency pair.
- Spread: The difference between the bid and ask price.
graph LR
A[Price Quote] --> B[Handle (Whole Number)]
A --> C[Stem (Fraction/Decimal)]
B -->|Example| D[$56.25]
C -->|Example| E[.25]
Humorous Insights
- “The handle is like a good haircut: it’s what everyone sees first, and you can always blame the roots if it doesn’t hold!”
- “Why do traders love talking about handles? Because ‘stem’ just doesn’t have the same ring to it!”
Fun Facts
- The term “handle” likely originated from traders trying to ascertain the quick price level without delving into cents, which feels like trying to find spare change in the couch cushions!
- In the high-paced world of forex trading, knowing the handle can save seconds. Remember, time is money—as long as the market isn’t offering a late fee!
Frequently Asked Questions
Q: Why do traders refer to the handle?
A: Traders refer to the handle for brevity and ease of communication, avoiding the clutter of cents when discussing price movements.
Q: Can the handle change during trading?
A: Absolutely! Handles can change as price quotes evolve, and traders often refer to these changes in their strategies.
Q: Is the stem important?
A: Definitely! While the handle gives a quick overview, the stem provides vital context for exact pricing, impacting decisions for entries and exits.
Suggested Readings
- “Trading for a Living” by Dr. Alexander Elder
- “Technical Analysis of the Financial Markets” by John J. Murphy
- “The Little Book of Forex Trading” by Ilya Spivak
Online Resources
Test Your Knowledge: Handle Trading Quiz
## What is meant by the term "handle" in trading?
- [x] The whole number part of a price quote
- [ ] The fractional part of a price quote
- [ ] The price after an earnings report
- [ ] A special type of trading algorithm
> **Explanation:** The handle refers specifically to the whole number part of a price quote, helping traders simplify communication about pricing.
## In a forex quote of 1.2345, what would be the handle?
- [x] 1.23
- [ ] 1.24
- [ ] 1.234
- [ ] 1.235
> **Explanation:** The handle is 1.23, which is the whole number part left of the decimal.
## If a stock price moves from $45.75 to $48.30, how many handles has it changed?
- [ ] 1.15
- [ ] 2.30
- [x] 3
- [ ] 4.20
> **Explanation:** The handle moved from $45 to $48; therefore, it's a change of 3 handles.
## Why might a trader avoid using the stem in conversation?
- [ ] They don't understand decimals
- [x] It’s too complicated for quick discussion
- [ ] They prefer whole numbers
- [ ] They never learned about stems
> **Explanation:** Traders use handles for ease of understanding and speed in conversations, avoiding lengthy explanations of decimal details.
## What would be the handle of a quote that reads $120.85?
- [ ] $120.8
- [ ] $120
- [x] $120
- [ ] $120.85 is the handle
> **Explanation:** The handle is $120, as it refers only to the whole number part of the quote.
## In terms of price quotes, what is a "stem"?
- [ ] The handle of a tree
- [ ] Pathways in trading
- [ ] The fractional part of a price quote
- [x] The decimal portion accompanying the handle
> **Explanation:** The stem is indeed the fractional part of a price quote, assisting in precision alongside the handle.
## If the handle for a stock is $30 but trades at $30.48, how would traders usually refer to it?
- [x] "The stock is at 30 handles plus."
- [ ] "The stock is at 30.48 handles."
- [ ] "The stock is at handle 30.4."
- [ ] "The stock has a handle of 30.5."
> **Explanation:** Traders commonly say "30 handles plus" for simplicity, referring to the whole number part.
## Can handles vary in different markets?
- [x] Yes, as they relate to security and price type
- [ ] No, handles are universal
- [ ] Only in the currency markets
- [ ] Only with commodities
> **Explanation:** Yes! Handles are market-specific based on asset pricing and vanity!
## Are handles irrelevant for day traders?
- [ ] Yes, they look only at cents
- [ ] Only on weekends
- [x] No, they are very relevant for quick delineation of price levels
- [ ] Only for stocks
> **Explanation:** Handles are relevant for all traders who need to gauge market levels quickly.
## In forex, if the bid is 1.3456 and the ask is 1.3459, what's the handle?
- [ ] 1.34
- [ ] 1.35
- [x] 1.34
- [ ] 1.345
> **Explanation:** The handle is 1.34, capturing the common whole number format in both bid and ask quotes.
Thank you for diving into the world of Handles! Remember, in the financial markets, having a firm grip on concepts makes trading much easier. Keep calm and trade on! 💵✨
