Spinning Top Candlestick Pattern Overview, Formation, How To Trade

Even so, they can provide you with some really useful insights, which I hope you’ve gleaned from today’s post. We know a spinning top at a technical point reveals sellers (or buyers in our case) think the price is too low/high – a good indication price is probably going to reverse. We can then use it to #1 know price still has a chance of reversing from the zone, and #2 as a timing mechanism on when to expect a PA signal to appear. Spinning tops, even though they can signal a reversal, often don’t – sometimes price simply stalls or retraces slightly after they form, hardly reversing an inch.

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. The indecision of the spinning top candlestick is a sign of an upcoming trend reversal. If you look at a spinning top in isolation it does not mean that much.

What Is a Spinning Top Candlestick?

As the market is trending down, the market sentiment is bearish, and most people anticipate that it will continue to go down for some more time. However, since the market has gone down for an extended period of time, buying pressure starts https://g-markets.net/ to increase, in the hope that a market reversal is imminent. Join thousands of traders who choose a mobile-first broker for trading the markets. Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

• CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
• The tops tell you buyers or sellers are firstly interested in wanting price to reverse – why else would they start battling the other side?
• If the spinning top is seen at the bottom of a downtrend, it could mean that a bullish reversal might happen.
• A spinning top appears 4 -5 hours after price enters the zone – some would call this a doji, but it’s really a spinning top.
• Not compared to pin bars and engulfing candles, which give us a clear idea of what price will next.

However, a spinning top can signify a future price reversal if confirmed by the next candle. Spinning top candlesticks can form a the the top or bottom of a pattern signaling the end of a trend. Look to see what pattern it is apart of for confirmation of this reversal. If a spinning top candlestick forms at the end of a head and shoulders pattern, look out for a bearish reversal coming.

This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. The value of shares, ETFs and ETCs bought through an IG share trading account can fall as spinning top candle well as rise, which could mean getting back less than you originally put in. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

The Lower Shadow:

However, a trader needs to apply technical indicators and signals to analyze the trading movements. Such an analysis will protect the trader from straying away from the trading pattern and stick within the risk management plan. Most traders use indicators to confirm the signal of a spinning top and gather more facts on the price trends.

The small real body is the main configuration of the spinning top candle. The shadow length is what separates a spinning top from a short black candle. So again, DO NOT use spinning tops as reversal signals, they don’t work. The candle doesn’t reveal who won the battle, only that it took place! You have to wait for the next candle to show a pin bar or engulf to know who’s now in control of price. It’s one of the main misunderstandings traders have about the spinning top and a key reason why price action traders lose money.

Spinning top in an uptrend:

One of our favorite indicators to define overbought and oversold conditions is the RSI indicator. The traditional interpretation is that readings above 70 signal an overbought market, and readings below 30 an oversold market. In our experience, the significance of a pattern can be greatly impacted by volume. Some patterns will work great when there is low volume, while others will only work in extremely high volume conditions. While the spinning top on its own is believed to signal a reversal of the trend, it’s not enough to act on alone. You need additional filters and conditions to ensure that the odds are in your favor.

It may not directly mean anything really as this happens quite often. A spinning top appearing in  strong uptrend indicates that the bulls are starting to lose control. Because the open and close price points are very near to one another, the color of the candle does not really matter. It could be a green or a red candle, what actually matters is the fact that the open prices and close prices are near to one another. If another spinning top forms, the bulls, and bears are still battling it out; stay on sidelines and wait for more PA. If they lose the battle, price will move sharply because there’s no-one left to stop it anymore.

Doji candles resemble a cross or plus sign, depending on the length of the shadows. The prominent trait of a doji is an extremely narrow body, meaning that the open and close prices are the same or very nearly the same. The high and low for the day determine the length of this candle’s upper and lower shadows. A doji is indicative of neutrality; when it is seen gapped above a previous hollow candle, it signals a reversal in buying momentum.

A small real body indicates that the open price and close price are quite close to each other. We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere. Yes, we work hard every day to teach day trading, swing trading, options futures, scalping, and all that fun trading stuff. But we also like to teach you what’s beneath the Foundation of the stock market.

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What are the main differences between a Doji and a Spinning Top pattern?

Even though the candle next to the Spinning Top is bearish, there is indecision between buyers and sellers. In this scenario, we may wait for the price actions and then go long or short. It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.

One should place a stop loss above or below the high/low of the spinning top when trading with it. On our site, you will find thousands of dollars worth of free online trading courses, tutorials, and reviews. If you’ve looked for trading education elsewhere then you’ll notice that it can be very costly. Also, we provide you with free options courses that teach you how to implement our trades as well.

From beginners to experts, all traders need to know a wide range of technical terms. Trade up today – join thousands of traders who choose a mobile-first broker. The information on this website is prepared without considering your objectives, financial situation or needs. Consequently, you should consider the information in light of your objectives, financial situation and needs. CFI is the official provider of the Capital Markets & Securities Analyst (CMSA)® certification program, designed to transform anyone into a world-class financial analyst.

If the bulls had succeeded, then it would have been a long green candle. So, this candle can be considered as an unsuccessful attempt by the bulls to take the market higher. Spinning tops are quite similar, but their bodies are larger, where the open and close are close. The main difference is a spinning top always has long legs on either side, indicating a large variance in the high and low. 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. As always, we must wait for price action signals – like pin bars, engulfs, etc – to confirm price is about to move away.

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