Spinning Top Candlestick: How to Trade With Examples

Spinning top candlesticks are found on stock charts and could be a bullish or bearish reversal sign. It has a thicker real body and also can be found in consolidation areas. Look for a price break above or below the candle to confirm direction. The timeframe plays a significant role in the reliability of the spinning top candlestick pattern. Higher timeframe spinning tops indicate more substantial market indecision and are more likely to precede significant trend reversals or consolidations.

Combining spinning tops with technical indicators

After the downtrend, there is buying seen at lower levels from the bulls which takes the prices up and the upper shadow is formed. Some profit booking is again seen at those high levels due to which the closing price is near the opening price resulting in the small real body of the pattern. The colour of the chart pattern – whether red or green is not important however a green candle is comparatively bullish.

To look at similar charts that can help provide a better understanding regarding this type of candlesticks, individuals can consider visiting the TradingView website. Price movements within the spinning top candlestick indicate that buyers and sellers are overriding each other, resulting in homogenous open and close price trends. Using the spinning top pattern in a trading strategy will help the trader work within the minimum suggested investment time.

What is a Morning Star Candlestick Pattern?

• The third variation shows two consecutive bullish-colored spinning top pattern.
• Since a spinning top can form both in an uptrend and downtrend, we’ll just exemplify with one that appears in a downtrend.
• In contrast, a spinning top has both upper and lower shadows and a larger body.
• The bullish spinning top, also known as the white spinning top, is a single-bar Japanese candlestick pattern representing indecision.

We can classify some important candlestick patterns by one, two or three candlestick patterns. The third important thing to consider is the size of the pattern and also on what time frame you are looking at the pattern at. Higher the timeframe, stronger is the pattern and the chance of a high probable setup. A candlestick pattern formed on a 15 min time frame chart vis a vis a weekly chart – obviously the weekly pattern holds more importance.

Scenario #5: Choppy Market or Consolidation Period

While the candle’s color can reinforce the signal, it does not guarantee a 100% price decline. A breakout of a key support or resistance level can serve as a confirmation and help make informed decisions regarding opening a long or short trade. The small real body shows that buying and selling pressure has evened out by the end of a period. A Spinning Top often indicates that the prevailing trend is losing momentum and the market is pausing to determine its further direction.

Mastering Bullish Candlestick Patterns: From Beginner to Advanced Trader

The confirmation of the reversal signal is given by the bullish candle on the next session after the formation of a Piercing Line Candlestick pattern. In case of a Bullish Harami pattern, we get a confirmation on the third candle. A probable trade set up can be initiated if the third candle crosses the 1st candles’s high keeping stoploss at the 1st candle’s low. A trader must keep in mind other technical parameters to initiate the trade. The bearish engulfing pattern is the opposite of the bullish pattern.

Implementing these risk management strategies helps protect your capital and ensures sustainable trading practices. These advanced strategies enhance the effectiveness of spinning tops, providing more precise and reliable trading opportunities. These conditions collectively create an environment where the spinning top can emerge, signaling a potential shift in market dynamics. A chart pattern, properly understood and confirmed, can give you a huge leg up on the competition – but first, you have to develop the know-how. The presence of a Spinning Top candlestick just before this failed breakout told you that there was indecision going into the breakout.

Our chat rooms will provide you with an opportunity to learn how to trade stocks, options, and futures. You’ll see how other members are doing it, share charts, share ideas and gain knowledge. Usually, they signify consolidation areas before the trend reverses to the opposite direction. A spinning top has a small body and long shadows, showing market indecision, while a high wave candle reflects market volatility. Whether novice or experienced, mastering this pattern equips traders to navigate the financial markets with confidence and seize lucrative opportunities. Trading on spinning tops presents challenges due to their ambiguous nature.

The important thing is to identify the trend in which the SpinningTop pattern occurs, and we can take positions accordingly. So the 1st candle is a bullish candle, 2nd candle is a doji or a spinning top. The real body of candle 1 and candle 2, should not overlap each other. Again the real body of the second and third candle should not overlap.

However, this does not mean that a spinning top white candle is a bullish pattern and a black one is bearish. Both types signal market indecision or a temporary balance between buyers and sellers. ✓  A black spinning top candlestick – a candle where the closing price is lower than the opening price.

This real body indicates a strong movement that may be in any particular direction either upside or downside. When a bullish Marubozu candle is formed, it indicates that the price opened, traded higher, and finally closed in the mid of an attempt to rise further. Here the opening price is the same as the low price and the closing price is the same as the high price. When a bearish Marubozu candle is formed, then it indicates that the price opened, traded lower, and finally closed in the mid of an attempt to fall further. Here the opening price is the same as the high price and the closing price is the same as the low price. The Spinning Top could also be analyzed in conjunction with the candlesticks that preceded it and the price chart in general.

• Like the majority of stock chart patterns, the spinning top appears in one of two, mirrored ways – as either a bullish spinning top or a bearish spinning top.
• Unlike some patterns that provide clear guidance, spinning tops may not offer distinct signals for setting these limits.
• If a Spinning Top emerges following an uptrend, the potential target may be the support level of the previous trend.
• So long as the market has explored both directions significantly, but the opening and closing prices are close, we have a spinning top on our hands.

This structured approach ensures that each trade based on spinning tops is methodically planned and managed for optimal outcomes. Learn the distinctive characteristics of spinning tops for better trading insights. The most common chart pattern of them all, the spinning top is simple in theory, difficult in practice, easy to understand, but hard to master. In summary, the market didn’t end up going either way after exploring both options. A textbook case of indecisiveness and testing the waters – but this is enough of a “clue” so to speak to build on in terms of analysis. Let’s go through some of the possible scenarios that lead to a spinning candlestick forming.

If after an uptrend, a spinning top is formed, the next candle closing below the low of the spinning top candlestick will confirm a possible bearish reversal. If after a downtrend trend, a spinning top is formed, the next candle closing above the high of the spinning top candlestick will confirm a possible bullish reversal. The spinning top candlestick should be accompanied with high volumes. Always consider other patterns spinning top candlestick pattern and indicators, to confirm the signal, and make sure that you do not deviate from your trading plan and risk management strategy.

Hence, it is usually analyzed alongside the next candle to either confirm a trend reversal or a trend continuation. Spinning tops provide valuable insights into market behavior through their unique structure. These patterns emerge when neither buyers nor sellers take control, forming a small body with long upper and lower shadows. They can indicate potential trend reversals or continuations depending on market context. A spinning top candle can suggest a potential trend reversal, particularly when it appears near key resistance after a price increase. Conversely, if a spinning top forms after a price drop towards a support level, it may indicate an upcoming upward reversal.