A spinning top is a candlestick pattern that has a short real body that’s vertically centered between long upper and lower shadows. The candlestick pattern represents indecision about the future direction of the asset. It means that neither buyers nor sellers could gain the upper hand.
As closing prices in the market settle near the opening prices, therefore, this pattern shows a draw between both sides. As the opening and closing prices are quite close to each other, there is a formation of a small body. The close of this candle may exhibit a bearish or bullish trend. A bullish trend will increase the price of a security or stock to bring it closer to its opening values. On the other hand, a bearish trend means a decline in the price of a stock closer to its opening value.
How does the Spinning Top pattern look in real life?
This means you can trade rising and falling markets to take action after both bullish and bearish spinning tops. Spinning tops are candlesticks with small real body and long upper and lower shadows. Dojis are smaller, with small real bodies and small upper and lower shadows. Both patterns occur frequently and are sometimes used to warn of a reversal after a strong price move. A strong move after the spinning top or doji tells more about the new potential price direction than the spinning top or doji itself.
- This indecision can signal more sideways movement, especially if the spinning top occurs within an established range.
- The spinning top forex pattern consists of one candlestick that has a small green or red body that is centred between a long upper and lower wick.
- We know that you’ll walk away from a stronger, more confident, and street-wise trader.
- The first stop level is directly beneath the low of the candlestick.
- A bullish spinning top is formed when the price opens substantially higher than the open price and then the sellers come back in and push it lower by the end of the day or candle period.
Look for price break above or below candle to confirm direction. After a strong price advance or decline, spinning tops can signal a potential price reversal if the candle that follows confirms. A spinning top can have a close above or below the open, but the two prices are always close together.
Differences Between Doji and Spinning Top Patterns
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. The spinning top candlestick trading strategy is a great way to predict the future direction of a crypto market. When combined with other forms of technical analysis, it presents crypto traders with a great opportunity to make more accurate investment decisions.
Spinning tops are a sign of indecision in the asset; the long upper and lower shadows indicate there wasn’t a meaningful change in price between the open and close. The bulls sent the price sharply higher and the bears sent the price sharply lower, but in the end, the price closed near where it opened. This indecision can signal more sideways movement, especially if the spinning top occurs within an established range. It can also signal a possible price reversal if it occurs following a price advance or decline. A spinning top forex pattern can appear after a strong bullish or bearish phase and signal a potential price reversal. Like most of the other patterns, it also suggests the imminent change in trend.
How a Spinning Top candlestick pattern is formed?
When it’s spinning smoothly, you don’t know when it will stop spinning and which direction it’ll fall. It’s easy to differentiate between the two because one has a body (the Spinning Top) and the other does not (the Doji). For example, in the chart below, we see that the spinning top in the Apple shares led to a small decline and further consolidation.
After all, if they were successful, the day would have resulted in a good blue candle and not really a spinning top. Unlike the Marubuzo, it does not give the trader a trading signal with specific entry or an exit point. However, the spinning top gives out useful information concerning the current situation in the market. The trader can use this information to position himself in the market.
TRADING STOCKS IN THE BULLISH BEARS COMMUNITY
The examples highlight the importance of confirmation and context. Spinning tops within ranges typically help confirm the range and the market’s indecision. Spinning tops within trends may be reversals signals, but the candle that follows needs to confirm. We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. If you look at a spinning top in isolation, it does not mean much.
What is most important is the direction of the trend before the spinning top candlestick occurs. So when spotting a Spinning Top candlestick pattern, look for a single candlestick with a short body between two long shadows. A spinning top tells traders that there is uncertainty in the market, because there wasn’t much of a change between the opening and closing price.
However keeping in mind the 2nd rule, i.e. ‘be flexible, verify and quantify’ even if there is a wafer-thin body, the candle can be considered a Doji. BlackBull Markets is a reliable and well-respected trading platform that provides its customers with high-quality access to a wide range of asset groups. The broker is headquartered in New Zealand which explains why it has flown under the radar for a few years but it is a great broker that is now building a global following. The BlackBull Markets site is intuitive and easy to use, making it an ideal choice for beginners. Keep in mind all these informations are for educational purposes only and are NOT financial advice.
- The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.
- Both patterns feature a single candlestick with a long wick extending from the top as well as the bottom.
- Cryptocurrency markets are highly volatile, with constantly changing signals and trends.
- But depending on the formation of the pattern this can be too restrictive or mean taking on too much risk.
- This appearance occurs due to pulls and pressures faced by stock from both sellers and buyers.