Forex trading is a global market that allows traders to exchange currencies from different countries. The market operates 24 hours a day, five days a week, and is the largest financial market in the world. To trade currencies, traders use a variety of tools and strategies, including handles, which are an essential part of forex trading.
In forex trading, a handle refers to the large number in a currency pair’s price that is not expressed in pips. For example, in the EUR/USD currency pair, the handle is the first two digits of the price, such as 1.20. The handle is significant because it is the part of the price that is most visible to traders and investors. It is the price that is typically quoted in financial news and analysis, and it can have a significant impact on market sentiment.
The handle is also important because it can act as a psychological level for traders. When a currency pair approaches a handle, traders may become more cautious or aggressive in their trading decisions. For example, if the EUR/USD currency pair is trading at 1.19 and approaching the 1.20 handle, traders may become more cautious and look for signs of resistance or support before making any trades.
Handles can also act as support or resistance levels in the market. If a currency pair is trading above a handle, that handle may act as a support level, which means that traders may be more likely to buy the currency pair at that price. Conversely, if a currency pair is trading below a handle, that handle may act as a resistance level, which means that traders may be more likely to sell the currency pair at that price.
In addition to acting as support or resistance levels, handles can also be used in technical analysis. Traders may use handles to identify trends, support and resistance levels, and potential entry and exit points for trades. For example, if a currency pair has been trading above a handle for an extended period, that handle may be a significant support level that traders should watch for potential buying opportunities.
Handles can also be used in conjunction with other technical indicators, such as moving averages, to identify potential trading opportunities. For example, if a currency pair is trading above a handle and above its 50-day moving average, that may be a bullish signal for traders, indicating that the currency pair is likely to continue its upward trend.
Traders should also be aware that handles can be volatile and subject to sudden price movements. For example, if a currency pair is trading near a handle and a significant news event occurs, such as a change in interest rates or a political announcement, that can cause the handle to break, leading to significant price movements in the currency pair.
In conclusion, handles are an essential part of forex trading and can provide valuable information to traders. They can act as support or resistance levels, indicate trends, and provide potential entry and exit points for trades. However, traders should be aware that handles can be volatile and subject to sudden price movements, and should use them in conjunction with other technical indicators and fundamental analysis to make informed trading decisions.
