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How to Trade the Spinning Top Candlestick Pattern

The only difference between the two is that the Doji pattern opens and closes at the same point. Another difference is that the doji is typically a sign of reversal. On the other hand, a bearish spinning top pattern happens when the price opens sharply lower and then buyers come back in. In the two situations, the price usually closely above or below the opening price.

Doing so will help confirm any reversals in the trend after the spinning top formation. We research technical analysis patterns so you know exactly what works well for your favorite markets. The Harami pattern is a 2-bar reversal candlestick patternThe 2nd bar is contained within the 1st one Statistics to…

Spinning top (candlestick pattern)

If you do spot a Spinning Top after an uptrend or a downtrend, it may signal a potential reversal. As seen in the short body of the candlestick, the market didn’t change much when it closed versus when it opened. Children’s spinning tops are the inspiration for the naming of the Spinning Top candlestick pattern. You can practise trading using the spinning top chart pattern with an IG demo account.

A step by step guide to help beginner and profitable traders have a full overview of all the important skills (and what to learn next 😉) to reach profitable trading ASAP. But within the session, the buyers and spinning top candle the sellers both had the upper hand at one point, which shown by the long upper and lower shadows. Both patterns feature a single candlestick with a long wick extending from the top as well as the bottom.

Bullish Spinning Top Candlestick Pattern

To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”. CFI is the official provider of the Capital Markets & Securities Analyst (CMSA)® certification program, designed to transform anyone into a world-class financial analyst. Candlesticks that resemble a spinning top with shorter and uneven shadows are known as doji. ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.

As per analysts, the spinning candlestick means that the current trend may be fizzing out and chances of trend reversal increasing. Here is another chart where the doji appears after a healthy uptrend after which the market reverses its direction and corrects. If the trader has been waiting for an opportunity to go long on the stock, probably this could be his opportunity to do so. However, to play safe, he could test the waters with only half the quantity.

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A spinning top candlestick means that a market has reached a point of indecision. Within the period, bulls sent the price up high, and bears sent it down low – but neither was able to maintain that momentum by the session’s end. However, a trader needs to apply technical indicators and signals to analyze the trading movements.

Because while bulls or bears were firmly in control of the market during its trend, they are now facing opposition – a sign that sentiment may be on the wane. TrendSpider automatically identifies spinning tops with mathematical precision. You can quickly highlight all spinning top patterns on a chart or even setup custom alerts that incorporate them. This can be very helpful to see confirmations at a glance or add them to your strategies. After the candlestick emerged, the stock had a lame push lower and then resumed the uptrend higher into the close. Meanwhile, aggressive traders can make a move and bet on trend reversal by analysing whether it is a bearish or bullish spinning top.

Spinning Top – 2 Trading Methods to Increase Their Accuracy

The classic definition of a Doji suggests that the open price should be equal to the close price with virtually a non-existent real body. Unlock our free video lessons and you will learn the exact chart patterns you need to know to find opportunities in the markets. To completely validate a trend reversal, we also added Fibonacci levels from the highest to the lowest price levels of the prior trend. In the chart below, the spinning top pattern occurs at the end of an uptrend after the second double top. Therefore, in this example, we can see a combination of the spinning top pattern and the double top pattern. Some indicators you could use along with a spinning top pattern are moving averages and the Relative Strength Index (RSI).

• And indeed, in the example above, this spinning top bearish pattern signals a trend reversal, and immediately after the next candle, a bearish trend begins.
• It could also act as a signal for more sideways movement and may mean that more neutral movement is about to occur.
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• It appears when the opening and closing prices of certain crypto are close to each other.
• It just conveys indecision as both bulls and bears were not able to influence the markets.

Here is another chart which shows the continuation of a downtrend after the occurrence of spinning tops. Here is a chart, which shows the downtrend followed by a set of spinning tops. What do you think would have transpired during the day that leads to creating a spinning top? On its face, the spinning top looks like a humble candle with a small real body, but in reality, there were a few dramatic events that took place during the day.

This candlestick pattern comes with a long upper and lower shadow and a small body at the center. It appears when the opening and closing prices of certain crypto are close to each other. The spinning top pattern is more significant in a market with strong trends, which could either be an upward (bullish) or downward (bearish) trend. When this occurs in such a market, it acts as a signal of a potential change in the price action. In other words, it shows that the opposing force of the market may be about to gain the upper hand. A spinning top candlestick is a chart pattern that forms over a single session.

When you are using these tools for technical analysis of a stock, it is important to have a particular risk management plan. Moreover, as this pattern indicates overall indecisiveness in markets, conservative traders can choose to stay away as there is no definite trend. In this scenario, a trader who has a bullish outlook forces prices back to the top level before closing. A lower wick and long upper indicate market turbulence or volatility during trading, with neither bears nor bulls gaining the upper hand. In the other direction, a bearish spinning top pattern occurs at the top of a trend and may signal a price reversal and a new trend direction. If a spinning top candlestick forms during an uptrend and is below the moving average, then trend reversal is possible.

How to trade when you see the spinning top candlestick pattern

Learn more about this pattern and how you can trade when you recognise it. For starters, there are many types of candlestick patterns in the financial market. They include patterns like the Doji, bullish and bearish engulfing, and hammer, among others.

• If a spinning top candlestick is formed at the peak of a bullish trend, this is a good sign that bears may gain momentum, which also means it can likely be a sell signal.
• Neither the bulls nor the bears could establish any influence on the market as this is evident with the small real body.
• This information has been prepared by IG, a trading name of IG Australia Pty Ltd.
• To learn even more about candlestick, check out this awesome video from YouTube here.

Spinning tops aren’t a very reliable technical indicator in isolation. According to Bulkowski, spinning tops predict a reversal roughly 50 percent of the time — not very helpful. They also appear very frequently in a chart, which means that it’s important to get a wider context before trading them. Deepen your knowledge of technical analysis indicators and hone your skills as a trader. Trading around a spinning top can also pose some problems since the candle can be quite large from high to low.