The Spinning Top Candlestick and Trend Indecision ????

The second variation shows a bullish-colored spinning top followed by a bearish-colored spinning top candle. The first variation above shows a bearish-colored spinning top followed by a bullish-colored spinning top candle. Both patterns feature a single candlestick with a long wick extending from the top as well as the bottom. A Spinning Top is interpreted as a neutral pattern but gains importance when it is part of other candlestick formations. My book,Encyclopedia of Candlestick Charts,pictured on the left, takes an in-depth look at candlesticks, including performance statistics. The early morning range breakouts are the bread and butter for many a trader.

The Spinning Top represents a tug-of-war where neither side gains ground, reflecting market indecision. This can often precede significant shifts in market direction as traders reassess their positions and the market consensus evolves. For instance, if the spinning top develops on the daily chart, you can lower your time frame to hourly to see how it formed during the day. That said, this cycle can actually happen more than once, particularly if the asset is highly volatile (with high volume). 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.

It is often a good idea to use multiple indicators at once to ensure the signal is true. Due to this indecision and uncertainty, it is hard to know where the market will head next.

1. Trading is one of the most profitable but, at the same time, risky activities.
2. One such pattern, the spinning top, plays a significant role in deciphering market sentiment.
3. Doji is a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow.
4. However, the spinning top gives out useful information concerning the current situation in the market.
5. The information on this website is prepared without considering your objectives, financial situation or needs.
6. The three black crows candlestick pattern comprises three consecutive long red candles with short or non-existent wicks.

As a general rule, you want the RSI to be above 70 (overbought area) during uptrends and below 30 (oversold area) during downtrends. When the RSI is in these regions, either a possible reversal or trend continuation can be supported by sheer momentum. A spinning top candle marks a point of indecision about the asset’s future. It reveals that neither buyers nor sellers have active control over the price, and both are fighting to gain the position of power. While a spinning top candlestick is a relatively easy to spot, the fact that it gives a sign of indecision makes it relatively difficult to use. At times, it can tell you that a reversal or more consolidation is about to happen.

White Spinning Top Candlestick: Discussion

While spinning tops can be powerful indicators, they have limitations. Due to their frequent appearance, not every spinning top signals a meaningful market change. Without proper confirmation, a spinning top can lead to false signals and premature trades. In contrast, another spinning top forms during a period of sideways price action. The next candle remains within the range, confirming that the market is still undecided, and the trend will likely continue in this range for a while.

By incorporating spinning tops into their analysis, traders can better anticipate changes in market dynamics, improving their timing and decision-making. Understanding candlestick patterns is vital for forex traders as they help in predicting future price movements and making informed trading decisions. By interpreting these patterns, traders can identify potential trend reversals, continuations, and indecisions in the market.

The real body of this candle is small and is located at the top with a lower shadow, which should be more than twice the real body. The psychology behind this candle formation is that the prices opened, and sellers pushed down the prices. It indicates that there was a significant sell-off during the day, and the buyers were able to push the price up again. The spinning top candlestick pattern appears regularly across trading charts and is usually very easy to spot – making it a popular tool among technical traders. A bullish spinning top is a candlestick pattern that occurs when the closing price is higher than the opening price.

What is the importance of the spinning top candlestick pattern?

A bearish signal is generated when the MACD line crosses the zero (center line) from above. The center line crossover generates the most accurate signal, especially in the long term. Sign up now and unlock your full trading potential with Morpher’s advanced charts.

Scenario #5: Choppy Market or Consolidation Period

So the next time you see either a Spinning top or a Doji individually or in a cluster, remember there is indecision in the market. The market could swing either way, and you need to build a stance that adapts to the expected movement in the market. Clearly, with no clarity on what is likely to happen, the trader needs to be prepared for both the situations, i.e. reversal and continuation.

This can either mean that more neutral movements are ahead, or a price reversal is about to occur. However, this approach may prove too rigid or expose traders to excessive risk, depending on the pattern’s formation. Navigating stop loss and take profit levels with spinning tops can pose challenges compared to spinning top candle other chart patterns.

If either a doji or spinning top is spotted, look to other indicators, such as Bollinger Bands, to determine the context to decide if they are indicative of trend neutrality or reversal. This information has been prepared by IG, a trading name of IG Australia Pty Ltd. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information.

1. Conversely, if the spinning top occurs at the top of an uptrend, it could suggest a bearish reversal.
2. While spinning tops can be powerful indicators, they have limitations.
3. Traders rely on various tools to gain insights into market behavior, and candlestick patterns are one of the most trusted visual indicators.
4. In addition, you can also use the RSI as a “divergence” tool to identify possible mismatches with price action.
5. The long upper and lower shadows represent sharp price swings in both directions, yet the small body reflects a lack of momentum.

To learn more about profit targets with pivot points, please check out our article here. The stock then broke above the high of the candlestick and began the next leg higher. In the above example, you can see how the candlestick was narrow relative to the volume candle that preceded the gap down. This light volume eating into a gap with a fat volume candle above increased the likelihood of the stock rolling over and that’s exactly what happened. Another method that works nicely is the combination of using volume candles to identify when a trend is set to change. By now, I hope you realize how powerful the Spinning Top candlestick can be if it is used in the right context.

Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. As we’ve already covered, though, spinning tops are best used alongside other patterns and indicators – so you might want to look elsewhere for your trade parameters, too. One difficult aspect of spinning tops is that, unlike other chart patterns, they don’t necessarily offer much insight into where to place your stop loss and take profit.

Mastering candlestick patterns like the spinning top can significantly improve your trading strategies by providing insights into market trends and potential reversals. To take your trading to the next level, it’s crucial to have access to reliable, real-time data and advanced charting tools. The Spinning Top candlestick pattern is a valuable tool for gauging market sentiment and impending volatility. By applying advanced strategies, considering the broader market context, and implementing effective risk management, traders can significantly enhance their trading performance. This pattern, when interpreted correctly and used in conjunction with other analysis techniques, forms a vital part of a sophisticated trading strategy.