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A binder clip is a strip of spring steel bent into the shape of an isosceles triangle with loops at the apex.
Tension along the base of the triangle forces the two sides closed, and the loops prevent the sharp steel edges from cutting into the paper.
The loops also serve to hold two pieces of stiff wire, which are used as handles and allow the clip to be opened.
The two slots cut in each loop are shaped so that the wire handles can be folded down once the clip has been attached, and the spring force of the wire holds them down on the surface of the paper.
This holds the clip relatively flat, for easier stacking of paper.
One handle can also be folded down while the other remains up to allow the stack of papers to be hung up.
The handles can also be removed altogether by squeezing them sideways and pulling them out, allowing for more permanent binding.
As compared to a paper clip, the binder clip is able to bind sheets of paper more securely, and is also resistant to rust.

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