Spinning Top Candlestick Pattern Overview, Formation, How To Trade
Candlestick patterns also indicate overall indecisiveness in markets, so conservative traders can choose to stay away as there is no definite trend. Aggressive traders should also only make a move and bet on trend reversal by analyzing whether it is a bearish or bullish spinning top. The large sell-off is often seen as an indication that the bulls are losing control of the market, and they are unsuccessful as the prices close below the opening price. This resulted in the formation of bearish patterns and signifies that sellers are back in the market, and the uptrend may end. Traders can enter a short position if, the next day, a bearish candle is formed and can place a stop-loss at the high of Hanging Man. A spinning top candle can suggest a potential trend reversal, particularly when it appears near key resistance after a price increase.
Doji vs Spinning Top Candlestick Patterns
A Bearish spinning top is a single candlestick pattern that represents indecision about the future price movement. A Bearish spinning top candlestick pattern has a short real body with upper and lower shadows longer than the body. A small real body means that the open price and close price are close to each other. 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.
- However, pin bars usually have relatively larger real bodies and a small wick at the opposite end of the candle’s long wick.
- By understanding these insights, traders can better interpret price action and make more informed choices in their trading plans.
- This pause can happen in the middle of an existing trend or at turning points.
- It means that a spinning top may alert about an upcoming crucial change in a trend.
- This shows that the bears are back in the market, and a bearish reversal is going to take place.
Carefully check the body size and shadow symmetry before labeling the candle. If so, keep reading if you want to learn the best bullish spinning top trading strategy. In fact, more often than not, the dojis and spinning tops appear in a cluster indicating indecision in the market. The storm could be in the form of a continuation or a reversal of the trend. In which way, the price will eventually move is not certain; however, what is certain is the movement itself.
Limitations of Using Spinning Top Candlestick Patterns
As you can see in the picture, although they look similar at first glance, there are some key differences. While both have small bodies, Doji candles have almost equal opening and closing prices forming the tiny real body of the candle, as well as much shorter upper and lower shadows or wicks. This scenario, translated into a candlestick pattern, gives you the spinning top. Likewise, a stock that opens at one price, sees a massive increase followed by a crash, but closes near to the opening price would likewise be a spinning top. So long as the market has explored both directions significantly, but the opening and closing prices are close, we have a spinning top on our hands. Below, we are going to show you the two types of spinning top patterns combined with Fibonacci support and resistance levels – bullish and bearish spinning top patterns.
- The entry could have been taken just before the close, or at the next day’s opening.
- The spinning top is a neutral candlestick pattern representing indecision between buyers and sellers at that point in time.
- While it is a valuable tool for identifying moments of indecision and potential turning points, it is not without its limitations.
- Traders often look for confirmation from the next few candles or additional technical indicators to decide whether the spinning top marks a temporary pause or the start of a new trend.
The Definitive Guide To Spinning Top Candlestick Pattern
This means that this will lead to the creation of a small real body, as a 4-point move is not much. Here, the opening price is higher than the closing price, and a bearish spinning top occurs. To see how successful your pattern trading experience can be, try using the ATAS Market Replay feature. This tool on the ATAS platform uses historical data to recreate real-time trading conditions. It enables traders to sharpen their skills in a completely realistic environment without any financial risks. However, analyzing the context in which the pattern appears, along with studying the volumes, can provide valuable insights into what this indecision signifies.
A double spinning top consists of two spinning top candlestick pattern consecutive spinning top candlesticks, representing extended indecision, where neither buyers nor sellers have taken full control for two sessions. 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. Near key support/resistance levels, it may suggest a potential reversal, especially if followed by confirmation. A bullish spinning top candlestick emerges in markets where uncertainty prevails, yet buyers slightly outnumber sellers. This candlestick is characterized by a small body that sits near the top of the trading range, indicating that buyers managed to push prices up, although not decisively.