Like its counterpart, the price opens and closes at about the same level, resulting in a small body. This formation shows us that sellers initially pushed prices lower, but buyers stepped in to push prices back up to a similar area. However, validation happens when the next candle has a large bullish body with little to no shadows. The bullish spinning top is a green-coloured candlestick with a small body positioned near the center of the candle’s range, along with equal or nearly equal wicks. The market opens and closes near the same level, resulting in a small body. Yes, it can appear in any market condition (uptrend, downtrend, and non-trending/sideways).
- This pattern often appears at the top of overextended rallies.
- A spinning top appears 4 -5 hours after price enters the zone – some would call this a doji, but it’s really a spinning top.
- The spinning top candle pattern needs to be combined with other methods of analysis, of course – but it is incredibly versatile.
Pros of the Spinning Top Pattern
However, certain candle shapes may give you some trading ideas, especially given the right context. That’s because context is always more important than exact criteria when it comes to trading candlesticks. Japanese candlesticks are the basic building block of most technical analysis. That makes the ability to recognize different candlestick types a crucial trading skill.
- Traders should use other strategies or indicators to confirm the signal given by the spinning top candlestick.
- However, the second circled pattern, a red or bearish spinning top, occurred at a particular juncture in the trading day.
- This duality showcases a tug-of-war scenario where prices fluctuate widely but end up closing close to the opening price, highlighting the struggle between buying and selling pressures.
- In volatile markets like crypto, this behavior becomes even more visible.
- Spinning top candles can help identify potential trend reversals.
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So the next time you open a chart, don’t just look at price — listen to what the candles are saying. For crypto markets in particular, candlesticks remain invaluable. With high volatility, round-the-clock sessions, and strong emotional swings, they provide the fastest visual feedback of crowd psychology. Finally, traders often forget that candlesticks reflect probability, not certainty. They increase odds when used correctly, but don’t guarantee outcomes.
A spinning top is a candlestick pattern that indicates uncertainty. With a spinning top, while both buying and selling pressure were present to a high degree, no clear winner emerged – which often signals the possibility of an upcoming trend reversal. This scenario, translated into a candlestick pattern, gives you the spinning top. Likewise, a stock that opens at one price, sees a massive increase followed spinning top candlestick by a crash, but closes near to the opening price would likewise be a spinning top.
Candlestick charts are an important tool for technical analysis, and spinning top candles are a dime a dozen. Knowing how to properly use this common Japanese candlestick pattern in your analysis can bring about plenty of trading opportunities that you might have otherwise missed. Most traders use indicators to confirm the signal of a spinning top and gather more facts on the price trends.
Upper and Lower Shadows of Similar Length
Yes, it clearly shows indecisiveness and uncertainty, but indecisiveness is not a direction; it’s just a state during a point in time. Hence, a spinning top is usually analyzed with the following candle in mind to determine whether the asset is more likely to continue its trend or make a trend reversal. In fact, relying on the spinning top as a standalone tool to determine future price direction is simply irresponsible, especially for beginners. A spinning top chart pattern can provide a possible entry point when utilizing a momentum trading approach. This is because highly volatile assets that reflect a high degree of interest from market participants tend to move fast and sharply over a short period of time.
Depending on the platform that you’re using, bullish spinning tops can be printed as green or white. The wicks or shadows of the candle are long – indicating the lowest and highest trading prices of the timeframe being considered. These significant departures in the high and low indicate a lot of volatility, a lot of action – but no clear winner.
How to Profitably Trade the Spinning Top Pattern
The only way to do this is by looking at subsequent candles for confirmation. While they are limited on their own, spinning top candles can lead you to plenty of opportunities that you might have otherwise missed. One limitation of using spinning top candles is that they do not always provide a clear indication of future price movements. They are just one tool in a trader’s toolkit and should be used in conjunction with other technical indicators. A spinning top doesn’t always lead to a reversal – but even those cases are significant when practicing proper risk management. Sideways action is a very common occurrence – and although that conclusion is less usable than a trend reversal, it is still usable.
But the real insight comes from comparing body and wick sizes. A long wick shows rejection or indecision, while a large body reveals conviction. It is also difficult to assess the reward potential of a spinning top candlestick trade as the price target cannot be set.
However, a confirmation from the next candle is key to determine whether the prices will drop after the uptrend. Moreover, partnering with a trusted and regulated broker like Opofinance ensures that you have the necessary resources and support to implement these strategies effectively. Choosing Opofinance as your broker means gaining access to top-tier services that support your trading strategies, including those involving the spinning top candlestick pattern.
Contextual analysis ensures that trading decisions based on spinning tops are well-founded and strategically sound. These advanced strategies enhance the effectiveness of spinning tops, providing more precise and reliable trading opportunities. These indicators work synergistically with spinning tops to provide a more comprehensive view of market conditions. These distinctions help traders determine the likely direction of the next market move based on the context of the spinning top’s appearance. Learn the distinctive characteristics of spinning tops for better trading insights. Access TradingView’s charts, real-time data, and tools, all in one platform.
This is why it is not a good idea to use the Spinning Top candlestick as a trading signal on its own. In this chart, after the Spinning Top candlesticks were formed, the price paused for a bit before continuing higher. Here, in a prevailing downtrend, the price formed several Spinning Top candlesticks but failed to reverse.
What are candlestick patterns?
In the second case, the white spinning top appeared after several days of sideways movement, with July 19 forming an inside bar — another candlestick signaling indecision in the market. ✓ A black spinning top candlestick – a candle where the closing price is lower than the opening price. ✓ A white spinning top candlestick – a candle where the closing price is higher than the opening price.
Or it may also indicate that the bulls have come and tried to take the prices higher, but they were unable to do so. Thus this can be considered as an attempt by the bears to take the stock prices lower, but they were not successful in doing so. The lower shadow tells us that the bears did take an attempt to bring the stock prices low, but they were not successful at it.