What Is Handles?
"Handles" in financial markets refer to the whole number portion of a price quote for a financial instrument. It is the part of the quote that appears to the left of the decimal point, essentially representing the "dollars" or "whole units" of the price. This term belongs to the broader category of financial terminology and is primarily used by professional traders as a shorthand for quick communication. For instance, if a stock price is \$75.50, the "handle" is \$75. The fractional or decimal part of the price is sometimes called the "stem" or "dollar price."5
History and Origin
The term "handle" emerged from the fast-paced environment of trading floors and electronic markets, where efficiency in communication is paramount. Traders developed this jargon to quickly convey significant price levels without having to articulate the entire price quote down to the fractional parts. It became a practical shortcut, particularly in markets where prices move rapidly and decimal points are numerous, such as the futures market and foreign exchange market. The underlying assumption among market participants is that the precise decimal component, or "stem," is already known or easily inferred within the immediate trading context.4
Key Takeaways
- "Handles" refer to the whole number part of a financial instrument's price quote.
- They serve as a quick communication tool among traders to indicate general price levels.
- The term is commonly used in equities market, futures markets, and foreign exchange markets, though its specific meaning can vary slightly across these domains.
- A change of "handles" signifies a significant price movement in whole units.
Interpreting the Handles
The interpretation of "handles" is straightforward: it signifies the prevailing whole-dollar or whole-unit price level of a security or index. When a trader refers to a certain "handle," they are highlighting the primary, most significant digits of a financial instrument's valuation. For example, if a bond is quoted at 101.10 bid price and 101.11 ask price, the handle is 101. Traders might then refer to the market simply as "ten to eleven," implying the 101 handle is understood.3 This shorthand facilitates rapid discussion, especially during periods of high volatility or when tracking market trends where precise decimal movements are less critical than the overall level.
Hypothetical Example
Consider shares of Company XYZ trading on a stock exchange. If the current stock price of Company XYZ is \$125.75, the "handle" is \$125. A trader might say, "XYZ just broke the \$125 handle," indicating that its price has moved above this whole-dollar mark. If the price then drops to \$124.90, another trader might remark that XYZ is now trading "below the \$125 handle."
In the foreign exchange market, the use of handles differs slightly. For a currency pair like EUR/USD, if the current quote is 1.0850 (bid) and 1.0852 (ask), the common "handle" would be 1.08. This represents the part of the quote that appears in both the bid and the offer, allowing traders to quickly communicate around that established level when discussing movements.2
Practical Applications
"Handles" are commonly applied in various financial markets where rapid communication about prices is essential.
- Equities and Futures: In equities markets and futures markets, handles simplify discussions about a security's or commodity's price. Traders frequently refer to changes in terms of handles, such as "the S&P 500 futures gained 10 handles today," meaning the index's price increased by 10 whole points. This helps in understanding broad price movement without needing to cite every decimal.
- Foreign Exchange (Forex): In forex, the "handle" refers to the initial digits of an exchange rate that are common to both the bid price and ask price for currency pairs. For example, if the EUR/USD is quoted at 1.1234 (bid) and 1.1236 (ask), the handle is 1.12. This streamlines communication for highly liquid spot markets where quotes often extend to four or five decimal places.1
This simplified communication is particularly useful when quoting prices over the phone or in high-frequency trading environments, allowing market participants to quickly agree on the general price level before discussing finer details, such as those found in an order book.
Limitations and Criticisms
While "handles" serve as a valuable shorthand for professional traders, their primary limitation lies in their imprecision for those unfamiliar with the specific market context. Since "handles" omit the decimal portion of a price quote, detailed price analysis or formal reporting would require the full quote. Retail investors typically view and rely on the entire price of an asset, as the handle alone does not provide sufficient detail for precise trading decisions or calculating exact gains or losses. The use of handles assumes a shared understanding of the specific financial instrument and its current decimal range among traders, which can lead to misinterpretation if that context is absent.
Handles vs. Pips
The terms "handles" and "pips" are both forms of trading jargon used to describe price movements, but they apply differently, especially within the foreign exchange market.
- Handles: As discussed, a handle represents the whole number portion of a price quote. In equities or futures, it signifies whole dollar or point changes (e.g., a stock moving from \$50.25 to \$51.25 moved "one handle"). In forex, it's the part of the quote common to both the bid and ask prices (e.g., 1.25 in a EUR/USD quote of 1.2560/1.2563).
- Pips: A pip (percentage in point) is the smallest standardized unit of change in a currency pairs quote, typically the fourth decimal place for most major currency pairs (e.g., a move from 1.2560 to 1.2561 is one pip). For JPY pairs, it's usually the second decimal place. While handles refer to the larger, whole-unit price level, pips denote the granular, smallest possible price fluctuation. Traders discuss pips when precise, small movements are being tracked, whereas handles are used for broader price levels.
FAQs
1. Why do traders use "handles"?
Traders use "handles" primarily for quick and efficient communication in fast-moving markets. It's a shorthand that conveys the general price quote of a financial instrument without needing to specify the decimal component, which is often assumed to be understood among market participants.
2. Is "handle" the same in all financial markets?
The core concept of "handle" as the whole number part of a price remains consistent, but its application varies slightly. In the equities market and futures market, it refers to the whole dollar or point value. In the foreign exchange market, it specifically refers to the digits of a currency pairs quote that are common to both the bid price and ask price.
3. Can retail investors use "handles"?
While retail investors might encounter the term, it is more prevalent in professional trading environments. Retail trading platforms typically display the full price quote including all decimals. Understanding "handles" can be beneficial for interpreting market commentary from professional traders, but it's not a common tool for everyday retail trading decisions.