Spinning Top Candlesticks: A Traders Guide
A major bearish engulfing pattern occurred when the price reached the apex of the rising wedge. This created a major downtrend and ultimately formed a falling wedge. The indecision of the spinning top candlestick is a sign of an upcoming trend reversal. Enhance your trades with actionable spinning top candlestick strategies. Understand the formation and implications of the spinning top candlestick pattern.
It indicates a small difference between the open and close prices within a large trading range. Spinning tops are commonly seen during market indecision, reversals, consolidation, and peak volatility. Yes, it can appear in any market condition (uptrend, downtrend, and non-trending/sideways). The spinning top is not exclusively used as a bullish reversal or bearish reversal. When analyzed with the subsequent candle, it can be effectively used in trending markets as a reversal or continuation tool. In the case of the marubozu, the important aspect to look at is the color.
- The first candlestick in the pattern is supportive of the current trend, and is quite large.
- Consequently, the opening and closing prices remain very close, forming a short real body within the candlestick.
- Notably, a Spinning Top pattern should not be used in isolation — it needs to be confirmed by subsequent candles, technical indicators, and fundamental factors.
- This pattern indicates the confrontation between buyers and sellers.
- They are just one tool in a trader’s toolkit and should be used in conjunction with other technical indicators.
- The opening and closing prices of the particular asset should be equal or at least closer, regardless of which one is higher.
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I do not recommend using the Spinning Top in trading, but if you must, combine it with these proven successful indicators such as the relative strength index (RSI) and rate of change (ROC). To identify the Spinning Top pattern, look for a small candle body with a long upper wick and lower wick at least twice the length of the body. Now that we have covered how you could improve the accuracy of a spinning top, we wanted to show you a couple of trading strategies. One of our favorite indicators to define overbought and oversold conditions is the RSI indicator. The traditional interpretation is that readings above 70 signal an overbought market, and readings below 30 an oversold market.
- Look for a price break above or below the candle to confirm direction.
- In the chart above, I have highlighted 10 spinning tops, 6 continuation patterns, and 4 reversals.
- In such situations, traders should wait for further confirmation before making any trade decisions.
- During a volatile day’s trading, bulls and bears push prices to extreme highs and lows.
- We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere.
How To Trade The Spinning Top Pattern
The spinning top’s delicate balance between the real body and the shadows visually encapsulates the market’s indecision. For professional-grade stock and crypto charts, we recommend TradingView – one of the most trusted platforms among traders. In the image above, both of the spinning tops we’ve circled are bullish. However, because they come after a period of rising prices, the fact that they are bullish is of little consequence – the fact that they are a signal of indecision is what matters. A stock chart pattern depicting a bullish spinning top and its subsequent decline, after an uptrend. A stock in the spinning top candlestick middle of an uptrend opens at an optimistic price, and immediately begins to tumble.
It is known to be a neutral pattern, though it could end up in reversals. In this post, we will discuss the spinning top candlestick pattern and all other attributes revolving around this pattern. A spinning top candlestick pattern indicates an indecisive market, as the open and close of the day are very close together. This indicates that buyers and sellers were evenly matched on a given day.
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. Spinning top candlesticks are a type of candlestick that signals high levels of uncertainty. They tend to show up during market indecision, reversals, consolidation, and peak volatility.