While spinning tops are a prevalent candlestick pattern, they are most effectively used alongside other technical analysis tools. In the ever-evolving world of trading, mastering the nuances of candlestick patterns can significantly enhance your market analysis and decision-making. One such intriguing pattern is the spinning top candle, often regarded as a signal of indecision in the market. The Spinning Top Candlestick Pattern is a powerful tool in the arsenal of any trader, offering valuable insights into market sentiment and potential trend shifts. By understanding its characteristics, formation, and how it compares to other patterns like the doji candlestick, traders can better navigate the complexities of the financial markets.

Spinning Top Candle vs. Doji

During this period, indecisive candles may be more prevalent, including spinning tops and different types of doji candlestick pattern. Since a spinning top is a neutral candlestick pattern, it can lead to either a bullish or bearish trend. Hence, it is best interpreted with the following candle to confirm the asset’s likely direction — either confirming a potential reversal or simply a continuation of the prevailing trend. Traders can trade spinning tops in several ways depending on their trading style and risk appetite.

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• 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.
• Eventually, the battle comes to a stalemate with neither side able to get the edge on the other.
• For instance, this can look like a major breakout from a prolonged sideways movement.
• Second, like other technical indicators (notably, the RSI), you can also use the MACD to help you pinpoint specific points of market sentiment shifts.
• If one of the shadows touches a support or a resistance line, or even breaches it temporarily, this will add weight to the case for a reversal.

In an uptrend, a spinning top forms, signaling potential bullish exhaustion. By combining spinning top observations with these technical indicators and analysis methods, traders can gain a more comprehensive understanding of market dynamics and make more informed trading decisions. As previously discussed, spinning tops are most effective when complemented with other patterns and indicators. Incorporating additional technical analysis tools and patterns can provide supplementary guidance, ensuring a more comprehensive approach to setting stop loss and take profit levels in spinning top scenarios. This is the perfect set of options when trading a spinning top, since it can be an indicator of a bearish or bullish reversal, a trend continuation or a signal of a sideways movement. Having all options available to you allows you to trade in any direction the market may move in.

• The pattern was then followed by a bullish candle that served as a reversal—indicating that market sentiment had shifted from bearish to bullish.
• Spinning tops that appear at higher timeframes such as daily, weekly, & monthly are more significant than those which appear within intraday timeframes.
• However, by the time the candles closed, their closing prices were located near their opening prices.
• Most of the time, they form at market turning points, usually near a recent high or low.
• When it appears at the end of an uptrend, it may signal a bearish sentiment, while at the end of a downtrend, it can indicate a potential bullish reversal.
• The signal was classified as a bullish true positive if the price high watermark size was greater than the price low watermark.

The spinning top candlestick pattern often gets confused with certain other candlestick formations, particularly the doji pattern. Both these patterns are considered neutral and share similar structures, with wicks extending upwards and downwards. Doji candles have almost no body, with the opening and closing prices nearly identical. Being a one-candlestick pattern, the spinning top candlestick is generally viewed as less reliable than two- and three-candlestick price patterns.

Fourth, using volume with price action is crucial in understanding the market context of the spinning top pattern. For instance, as we can see on the chart, the spinning top is backed by substantial volume, roughly twice the daily average. This can indicate that the upcoming move will likely be significant in either direction—further trend continuation or possible reversal. Upon seeing the potential reversal confirmation or continuation candle, we can take a position and closely watch the volume for any significant spike to guide our trailing stop.

If the bears are willing to sell to stop price rising further, causing a spinning top to form, we know one side of the market doesn’t want price to continue rising – making a reversal or retracement likely. It just means one side was able to edge the other slightly, but not enough for a decisive victory. It’s only when the body forms right at the end that it’s not classed as a spinning top… we call these pin bars. Having a detailed knowledge of candlesticks and what they signal is one of the key requirements for successful trading. FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and spreads, fast, quality execution on every trade.

Is Spinning Top a Doji?

It forms from the bulls and bears bitmex review battling for price supremacy but coming to a stalemate, and typically signals indecision in the market – which isn’t always true, as you’ll see later. A spinning top candle in an uptrend suggests a potential reversal or consolidation, while a downtrend may indicate a pause or reversal. To recognize a spinning top candle, examine the dimensions of both the body and the shadows.

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Moreover, no candlestick formation guarantees a trend reversal, not even a common candlestick pattern. Price movements can go in any direction and a candlestick pattern only reflects changing sentiment that has shown a tendency to reverse trends based on historical price behavior. As with a few other price action techniques that will be taught in this series, multiple occurrences of these two candlestick formations increase the odds of a reversal in price. For more information about trading the doji, spinning top, and many other candlestick patterns, please check out Steve Nison.

These recurring candlestick patterns often help technical traders to forecast the short-term price direction of a market, depending on the type of candlestick identified and where it forms on a chart. Finally, in relation to the low volume during technically “trending” periods, indecisive candles—including the spinning top—may simply be a by-product of lower liquidity caused by low market interest. When market interest is low, the asset can be easily pushed between two price extremes on that specific day. This is why analyzing this pattern together with the volume indicator is vital to pinpoint valid spinning tops to watch out for.

Best Way To Use Tops: Early Reversal Signals

Meanwhile, the long upper and lower shadows reflect significant volatility within the trading session. This duality showcases a tug-of-war scenario where prices fluctuate widely but end up closing close to the opening price, highlighting the struggle between buying and selling pressures. Spinning tops at support and resistance levels, supply and demand zones, or fib retracements have a much higher probability of indicating a reversal. Use them as a warning signal price is about aafx trading review to reverse away from the level/zone, then watch for confirmation using pin bars or engulfing candles. A candle you’ll find all over your charts, the Spinning Top is one of the most common candlesticks in forex.

Contextual analysis ensures that trading decisions based on spinning tops are well-founded and strategically sound. Dispelling these misconceptions helps traders use spinning tops more effectively without overreliance on the pattern alone. We will look to short a failed breakout at an important swing high or resistance level, within the context of an overall downtrend. The price attempts to breakdown below the swing low, but forms a Spinning Top candlestick instead. It went into a consolidation forming several Spinning Top candlesticks within the flag. This was followed by a pause where the formation of Spinning Top candlesticks indicated low volatility.

PrimeXBT (PTY) LTD is an authorized financial services provider in South Africa with license number having its registered address at 180 Lancaster Road, Gordons Bay, Western Cape, 7140, South Africa. GBP/USD was slightly better with success rates around 52% for both bearish and bullish signals. If one of the shadows touches a support or a resistance line, or even breaches it temporarily, this will add weight to the case for a reversal.

Explanation of the Small Real Body and Long Upper and Lower Shadows

Spinning Tops are commonly found within both uptrends and downtrends and can suggest that a trend is losing momentum. Trading with the spinning top candlestick requires caution powertrend and confirmation. Traders should ideally wait for the next candle or use technical indicators to confirm the signal provided by the spinning top. This approach helps to eliminate uncertainties, providing a more reliable reversal signal. While the spinning top candlestick pattern has a short body and long wicks, the marubozu has a long body with little to no wicks.