More often than not, after forming the Spinning Top candlestick, the price will pause for a while or have a small reaction, only to make a trending move again. As mentioned, the Spinning Top candlestick tells you that there is a pause or indecision in the market. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. Both patterns feature a single candlestick with a long wick extending from the top as well as the bottom. Similar in shape to its toy counterpart, a Spinning Top has a short body (black or white) and two long shadows.

When a spinning top appears after an uptrend, it can suggest that the bulls might be losing steam, hinting at a possible bearish reversal. On the other hand, a spinning top emerging after a downtrend indicates that the bears might be weakening, suggesting a potential bullish reversal. Implementing these takeaways can transform your trading approach, leveraging the spinning top candlestick pattern to achieve greater market success. Finally, both the spinning top and dragonfly doji are also one-candlestick patterns. In terms of use case, dragonfly dojis are similar to the hammer and bullish pin bars. This is perhaps unsurprising considering the similarity in appearance of the three candlestick patterns.

Spinning tops form when the bulls and bears battle for control of price, but neither side can overwhelm the other. Top stories, top movers, and trade ideas delivered to your inbox every weekday before and after the market closes. On EUR/USD the bullish pattern appearance was more reliable with a 57% success rate, and a small average profit of 0.4%. To measure the reliability of this pattern we tested it across several asset types over multi year periods. Implementing these risk management strategies helps protect your capital and ensures sustainable trading practices.

A break above the high of the spinning top may signal the trend will continue upward, while a break below the low could suggest the trend may move down. Observing how subsequent candles interact with the spinning top can help a trader gauge the market’s intentions. This indicator gauges market momentum and velocity within a specified timeframe, aiding in price movement predictions. Upon confirmation of the impending reversal, traders may initiate a long position hoping for an uptrend. For instance, if a spinning top appears at the downtrend’s end, suggesting a potential reversal, traders might use the stochastic oscillator to validate the signal. That being said, it is not always that easy to identify the spinning top patterns that are most likely going to lead to a trend reversal, especially when you are trading in real time.

The body represents the opening and closing prices of a currency pair, while the shadows represent the high and low prices. When the opening and closing prices are very close, the body of the spinning top is bitbuy review small. Conversely, when the opening and closing prices are far apart, the body of the candlestick is large. They usually have relatively small upper and lower shadows, although there are exceptions. Traders typically look for confirmation from subsequent price movements or other technical indicators to decide on a course of action. In such cases, traders typically wait for confirmation of the next price move.

Disadvantages of Trading the Spinning Top Candlestick Pattern

As with all candlestick patterns, there are some limitations to the spinning top candle. While the spinning top candlestick appears frequently, it also comes with drawbacks because it routinely appears during sideways movement, which leads the price nowhere. Spinning tops are similar to dojis, and in Forex they can be traded the same way.

When the orange line is above the blue line, the market sentiment is overall bearish, while when the blue line is above the orange line, the market sentiment is generally bullish. Hence, there is usually a noteworthy price action movement when these two lines cross over, indicating a shift in market sentiment, and you can use this to guide your trailing stop decision. Second, like other technical indicators (notably, the RSI), you can also use the MACD to help you pinpoint specific points of market sentiment shifts. As shown, there are two primary lines—the blue (which is called the MACD line) and the orange (which is referred to as the ‘Signal’ line). With this bearish setup example, a sell order was placed a few pips below the red confirmation candle’s low and a stop-loss order was placed a few pips above the spinning top’s high.

What Is a Bearish Spinning Top Candlestick?

If they lose the battle, price will move sharply because there’s no-one left to stop it anymore. That liquidity (people buying or selling to battle the other side) has been removed from the market, so price must continue in its current direction until more buyers or sellers are found. If a spinning top forms on the daily, you know a seriously big battle is raging.

How to use a Spinning Top Candlestick Pattern in Trading

The spinning top candlestick chart pattern develops when buyers and sellers reach an equilibrium, leading to minimal changes between opening and closing prices. This subtle shift is usually called a continuation pattern in trading terminology. Therefore, a spinning top can signal a flip from bullish to bearish or bearish to bullish sentiment. However, most traders use other confirmations, including the trend that the pattern is forming in, as well as nearby support and resistance. The spinning top candlestick’s primary implication is a state of market indecision.

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• Hence, it is usually analyzed alongside the next candle to either confirm a trend reversal or a trend continuation.
• The spinning top candlestick’s primary implication is a state of market indecision.
• A spinning top formed after the stock reached a new all-time high, with the candlestick showing a small real body and long shadows.
• Much like other candlestick formations, a spinning top candlestick is composed of a shadow, body, and tail.
• One such intriguing pattern is the spinning top candle, often regarded as a signal of indecision in the market.

For example, suppose the spinning top is followed by a bearish candle, serving as a potential trend reversal for the ongoing uptrend and subsequently leading you to take a short position. Then, watch out when the RSI starts to point up, as it can serve as a leading indicator of a possible change in market sentiment. Both spinning top candle and doji are candlestick patterns that indicate indecision and a possible reversal of the trend. A spinning top candle has a small body and long upper and lower shadows, while a doji has no body or a tiny body and long upper and lower shadows. Moreover, partnering with a trusted and regulated broker like Opofinance ensures that you have the necessary resources and support to implement these strategies effectively. The spinning top is a neutral candlestick pattern representing indecision between buyers and sellers at that point in time.

Therefore, it’s important to consider the spinning top pattern within the broader context and get confirmation from other analysis tools. A spinning top formed after the stock reached a new all-time high, with the candlestick showing a small real body and long shadows. Traders used this pattern in conjunction with moving averages and MACD indicators, which confirmed a potential reversal. Shortly after, AAPL experienced a pullback, validating the spinning top as a reliable reversal signal in this context.

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. For instance, this can look like a major breakout from a prolonged sideways movement. When such a breakout occurs, it usually catapults the price, making substantially higher highs and higher lows in just a few trading sessions. For instance, if the spinning top develops on the daily chart, you can lower your time frame to hourly to see okcoin review how it formed during the day.

• If following a downtrend, it might suggest a potential bullish reversal, but confirmation from subsequent candles is needed.
• Similar in shape to its toy counterpart, a Spinning Top has a short body (black or white) and two long shadows.
• We will look to short a failed breakout at an important swing high or resistance level, within the context of an overall downtrend.
• Even better, you can choose to wait for the next candle or candles to present a potentially better entry, particularly if the price has normalized for the time being.
• The narrow gap between open and close price means that no headway was made during the time period of the candle.

CFD trading guide

The spinning top on the far left formed at the start of a consolidation phase and the remaining two spinning tops at highs prior to strong bearish reversals. For traders, a Spinning Top provides a valuable insight into market psychology, as it hints that the prevailing sentiment may be weakening. While Spinning Tops alone aren’t always definitive, they can serve as a precursor to larger moves if the following candles confirm a shift in sentiment. If you’re interested in enhancing your understanding of candlestick psychology, The Chart Guys offer extensive resources and community support, ideal for anyone xm broker review serious about mastering technical analysis. In a bullish spinning top, the closing price is slightly above the opening price.

What Is the Spinning Top Forex Pattern?

In this scenario, we may wait for the price actions and then go long or short. Seeing one tells you the bulls and bears are really fighting it out – hence why the wicks are so big. So after one forms, watch for your typical signs of a reversal – pin bars, support and resistance, etc – as price could be gearing up for a large reversal. A spinning top has a small body with visible discrepancies between opening and closing prices, whereas a Doji’s body is almost non-existent. This pattern indicates a period of indecision and balance between buying and selling pressure. Depending on its position within a trend, it can signal consolidation, continuation, or a reversal in price direction.

All information on The Forex Geek website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold The Forex Geek and any authorized distributors of this information harmless in any and all ways. Whoever wins will control price, but that will only show on the next candle, not the spinning top.