The candle has a small body, long wicks, and seeing as it is bearish, the opening price was higher than the closing price. Yes, spinning tops can form on charts of all tradable assets, forex, stocks, commodities, indices, and cryptocurrencies, as long as price data is displayed in candlestick format. Traders, armed with this knowledge, can contemplate short positions, particularly if other technical tools validate the bearish perspective. If the spinning top is followed by a series of bearish candles or appears near a resistance level, it could further solidify the case for a bearish turn. Conversely, when this pattern is spotted after a robust uptrend, it can be an indicator of a potential bearish reversal. The spinning top, in this scenario, hints that the bulls might be running out of steam, and a bearish sentiment could be taking root.
However, the downward push is temporary – in the middle of the trading day, bulls send the stock significantly over the opening price. By the end of the day, the enthusiasm has abated – and the stock closes very near to its opening price. The spinning top candle pattern needs to be combined with other methods of analysis, of course – but it is incredibly versatile. Trend reversals can easily be taken advantage of with both long-term and short-term approaches, and even with both single-leg and multi-leg strategies. That moment of indecision can be a sign of reversal – an upcoming change in a thus-far prevailing trend. With options experiencing high volume and liquidity, there’s money to be made in the market – and identifying a trend reversal is one of the most surefire ways to do just that.
However, this does not mean that a spinning top white candle is a bullish pattern and a black one is bearish. Both types signal market indecision or a temporary balance between buyers and sellers. ✓ A black spinning top candlestick – a candle where the closing price is lower than the opening price. ✓ A white spinning top candlestick – a candle where the closing price is higher than the opening price. When the bulls dominate, the prices increase, creating an uptrend market.When the bears dominate, the prices decrease, forming a downtrend market.
Confirming Spinning Top Patterns
And it can be dangerous to make trades based on incomplete candles. For professional-grade stock and crypto charts, we recommend TradingView – one of the most trusted platforms among traders. However, as it occurred during a period of range trading, and there were no factors to support a breakthrough in either direction, it wasn’t a sign of anything big coming up. A chart pattern illustrating the bottom of a bullish spinning top after a downtrend. As we’ve said, all of this points to one conclusion – there is interest, and there is both buying and selling pressure, but ultimately, indecision is the end result.
Where is the Pattern?
There are times when it could signal that buyers or sellers are gaining momentum for a continuation trend. Normally these Doji’s indicate markets are tired, and want some rest. The current market sentiment is bullish, and the prices keep on making higher highs. When the first candle of the evening star forms, this bullish sentiment holds. When the second candle is formed, then the market sees another bullish day as the candle gaps up.
While both the spinning top and the doji are indicative of market indecision, they are distinct patterns with different implications. A doji is characterized by an almost non-existent body, suggesting that the opening and closing prices were nearly identical. This pattern reflects a perfect balance between buying and selling pressures. The spinning top, however, has a discernible body, albeit small, indicating a slight difference between the opening and closing prices. Both patterns highlight market uncertainty, but their appearance in different market contexts can lead to varying interpretations.
Other Types of Candlesticks
Doji candles resemble a cross or plus sign, depending on the length of the shadows. The prominent trait spinning top candle 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.
- It doesn’t matter which color the body is. In practical application though, “perfect” spinning tops are comparatively rare.
- The price action on the Marubozu day suggests that the sentiment has changed and the stock is now bullish.
- The real body of the candle on Day 2 will be well within the real body of Day 1 candle.
- The two patterns are nearly identical, with very small differences that in fact are negligible.
Candlestick Charts & Patterns
All of the data that is available suggests that, performance-wise, both bullish and bearish spinning tops behave in the same way. Even at a more abstract level, both of these variations suggest the same thing – indecision. In the middle of a longer downtrend, a green spinning top – a bullish spinning top, is printed. After a long period of dropping prices, both the bulls and the bears are evenly matched – and this sets the stage for increasing investor confidence and an upswing. The wicks or shadows of the candle are long – indicating the lowest and highest trading prices of the timeframe being considered.
How to read candlestick Charts?
You can practise trading using the spinning top chart pattern with an IG demo account. You’ll be able to open and close positions in a risk-free environment with £10,000 in virtual funds. However, certain candle shapes may give you some trading ideas, especially given the right context.
- The bullish candlesticks are the blue ones, and the bearish ones are the orange ones.
- We have not established any official presence on Line messaging platform.
- Most markets have some type of seasonal or time-based tendencies, meaning that they aren’t equally bullish or bearish all the time.
- Conversely, a close below the body could signal a possible downtrend.
Number 6 indicates the spinning top candle in the 15-minute DAX futures chart above. The closing price is slightly above the opening price, approximately in the middle of the candle. Both patterns feature a single candlestick with a long wick extending from the top as well as the bottom. A Spinning Top is interpreted as a neutral pattern but gains importance when it is part of other candlestick formations.
Seasonal or Time Based Tendencies
It has a thicker real body and also can be found in consolidation areas. Look for a price break above or below the candle to confirm direction. Confirmation from subsequent candlesticks is crucial in accurately interpreting the spinning top candlestick pattern. Traders await confirmation in the form of price action following the spinning top. For instance, a reversal anticipated after an uptrend spinning top should see prices declining in the subsequent candle.
However, pin bars usually have relatively larger real bodies and a small wick at the opposite end of the candle’s long wick. This is useful when your trading strategy is intraday in nature (assuming your chart is set to daily) or when you want to dispose of your asset at the following day’s opening. However, this is not a substitute for the following candle to serve as a confirmation—which is much more reliable. We simply want to show that even “neutral” candles can have a bias toward a specific direction. For instance, if the spinning top develops on the daily chart, you can lower your time frame to hourly to see how it formed during the day.
