The asset is neither bullish nor bearish, and the price is at or near equilibrium. Hence, this pattern can signify a “decision point” on whether the trend continues or if a reversal appears. The second candlestick indicated by dotted lines is a spinning top due to its shorter real body and long upper and lower shadows. The spinning top candlestick could signal a possible reversal as the bulls have taken over and maintained the price level.
There is no difference in how both are used, as they can be used effectively in both uptrends and downtrends, except, of course, during non-trending periods. When market interest is low, the asset can be easily pushed between two price extremes on that specific day. Hence, this gives the appearance of a short body and long wicks.
Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success. Spinning tops may not mean anything on the day they form, but they signify a significant trend reversal. Trading Futures and Options on Futures involves a substantial risk of loss and is not suitable for all investors.
- The spinning top candlestick could signal a possible reversal as the bulls have taken over and maintained the price level.
- Traders seek confirmation from subsequent patterns or indicators before acting on such signals.
- Similarly, in an uptrend, if a bearish form at the top in the spinning top pattern, it can be used as an exit point.
- High trading volume during the formation of a spinning top can add weight to the signal, suggesting that the indecision is significant and may lead to a notable market move.
Perhaps one of the most critical insights the spinning top provides is the need for caution and further validation before acting on its signal. While the pattern is useful for spotting changes in market behavior, it is not a definitive indicator on its own. Traders are reminded to seek additional confirmation, such as follow-up candlestick formations or signals from technical indicators, before making decisions. This careful approach helps reduce the likelihood of false signals and improves the overall reliability of trading strategies built around the spinning top.
60-90% of retail investor accounts lose money when trading CFDs with the providers presented on this site. The information and videos are not investment recommendations and serve to clarify the market mechanisms. Our approach emphasizes high risk-to-reward trades and sharp execution in forex and other markets, helping you build confidence in reading price action and making informed decisions. Research by Liberated Stock Trader (which looked at 9,894 spinning tops on 568 years of data) indicates that the pattern is 55% accurate.
Traders analyse its context, technical factors, and confirmation from other indicators to interpret its significance. The spinning top candlestick pattern offers valuable insights into market indecision, but like any tool in technical analysis, it has its strengths and limitations. Understanding these might help traders use it more effectively. There is another bearish spinning top candlestick pattern on the right. The spinning top candlestick is a clear visual signal of market hesitation. Its small body and balanced wicks show that neither side held control, making it a useful early clue to reassess momentum—especially near key levels or after strong trends.
What Does a Spinning Top Candlestick Tell You?🔗 Tell
Algorithms may execute trades, but they’re programmed by humans who still react to fear, greed, and uncertainty. Combining candlestick patterns with other tools like moving averages, RSI, or Bollinger Bands adds further precision. Don’t trade the pattern itself — trade what happens after it. For example, after spotting a hammer, wait for the next candle to close above the hammer’s high. A bullish engulfing pattern in the middle of a sideways range means little, but the same pattern after a month-long selloff can mark the bottom. Always consider trend direction, support and resistance zones, and trading volume before acting.
Indications of Market Indecision and Potential Trend Reversal
- The spinning top candlestick shows that both buyers and sellers were active during the trading session, but neither side was able to take full control.
- Both patterns frequently occur and can be used to warn of a reversal after a strong price move.
- It’s important to understand that the spinning top, on its own, is not a definitive buy or sell signal.
- A hammer candlestick typically signals a bullish reversal, while a spinning top suggests indecision rather than a clear directional bias.
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. That being said, our website is a great resource for traders or investors of all levels to learn about day trading stocks, futures, and options. Feel free to ask questions of other members of our trading community. We realize that everyone was once a new trader and needs help along the way on their trading journey and that’s what we’re here for.
While indecision patterns alone don’t predict direction, they alert traders to pay attention. The candle that follows a doji often reveals which side wins the next round. Born in 18th-century Japan from rice trading records, candlestick analysis has stood the test of time. Despite modern trading algorithms and lightning-fast markets, these simple shapes still capture something algorithms can’t — emotion.
Downside Tasuki Gap: Meaning, Formation & Guide
You’ll only lose money and wonder why they didn’t work as expected. The best way to use tops is as an early warning signal the current move could be coming to an end, and price may soon reverse or retrace slightly. You won’t have much trouble identifying the spinning top – it’s one of the most common candlesticks, so you’ll see it pretty much everywhere. The most common chart pattern of them all, the spinning top is simple in theory, difficult in practice, easy to understand, but hard to master.
As I said, the Spinning Top candlestick is an indecision candle… Well, the Spinning Top candlestick is basically a small-to-medium range candle marked by a small body and relatively longer wicks… Indicates indecision with potential for continuation or reversal Price approaches a key support level and forms a spinning top, suggesting indecision. Shortly after, price breaks below the support with a surge in volume, confirming bearish strength.
Spinning Top vs. Doji: Key Differences Traders Must Know
An indication of the uncertainty of the future trend of an asset where the traders are unable to sustain the price of a commodity Dispelling these misconceptions helps traders use spinning tops more effectively without overreliance on the pattern alone. These differences influence how traders interpret the signals and incorporate them into their trading strategies. The primary visual difference lies in the presence of a small real body in spinning tops versus the almost nonexistent real body in dojis.
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The difference is that spinning top candlesticks usually have real bodies—despite how small they may seem—and much longer spinning top candlestick wicks on both sides. 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.
How To Read Spinning Top Candlesticks: The Ultimate Guide
This pattern often appears at the top of overextended rallies. It starts with a large bearish candle, followed by a small indecision candle (often a doji), and ends with a strong bullish candle that closes deep into the first. A green (or white) candle means price closed higher than it opened — buyers dominated. A red (or black) candle means it closed lower — sellers had control.
And once you’ve chosen your asset(s) and trading style, the full chart narrative truly comes into focus. You can never be 100% sure how a candlestick will look at the end of the time period. And it can be dangerous to make trades based on incomplete candles. Within the time period of the candle, price ended up near where it began. Technically, spinning tops should have wicks of equal length. It doesn’t matter which color the body is. In practical application though, “perfect” spinning tops are comparatively rare.
Spinning Top Candlestick: Meaning, Examples & How to Use It
Trading stocks by looking at spinning tops helps decide when an investor should buy or sell. Also, some traders invest in derivatives and speculate on the price movements of underlying assets. A spinning top is created when bulls in the market push the price higher while the bears push the price lower.