While Standing or while Travelling or Setting independently, the hands should hang loosely at the side, with two exceptions: a Lady wearing a long dress may, while moving, use her free hand (both hands if both free) to hold the front of her dress off the floor; where a Setting step other than Pas-de-basque or Common Schottische (the Strathspey setting step) is involved, the arms may be held in a Position appropriate to that step in its original tradition, usually Highland Dancing or Ladies' Step Dancing.
Physical contact with the other Dancers in one's Set is almost entirely hand to hand and so polite and graceful movements are of the essence when Taking hands.
The other niceties covered are:
Bow and curtsey; and
links to these are shown below.