Spinning Top Candlestick Pattern
2 hours later, 3 consecutive big bearish pin bars form, telling you the bears have probably won the battle and that price could be about to fall, which it then does. However, we still got confirmation the zone was valid for trading and a heads up that a potential reversal could soon begin… which in itself was a worthwhile signal we can use to our advantage. As always, we must wait for price action signals – like pin bars, engulfs, etc – to confirm price is about to move away. For example, if a spinning top forms just as price breaks out of a falling wedge, you might use its height to estimate the upside target. This is a more advanced strategy that requires experience in pattern recognition, but it can offer higher-probability targets when the setup aligns.
What is a spinning top candlestick pattern?
- The primary visual difference lies in the presence of a small real body in spinning tops versus the almost nonexistent real body in dojis.
- In order to form a complete trading strategy, you need to understand the basic math of trading, order types, and trading psychology.
- The effectiveness of spinning top patterns may vary based on the timeframe and market conditions.
- A Spinning Top candlestick pattern is a neutral technical analysis pattern that can indicate a potential trend reversal or continuation.
- Here, it serves as an early signal that bears may be losing momentum, potentially followed by a bullish candle that confirms the upward trend.
These spinning tops can signal a reversal may soon begin, but DO NOT take them as entry signals. Most of the time, they form at market turning points, usually near a recent high or low. Look at any pair on any time-frame, and you’ll see them everywhere.
Upper and Lower Shadows of Similar Length
- Higher timeframe spinning tops indicate more substantial market indecision and are more likely to precede significant trend reversals or consolidations.
- Ultimately, the closing price ends up being very close to the opening price.
- The timeframe plays a significant role in the reliability of the spinning top candlestick pattern.
- PrimeXBT (PTY) LTD acts as an intermediary between the investor and the market maker, which is the counterparty to the products purchased through PrimeXBT.
- A large candle that closes in the opposite direction hints at a potential turning point.
- The candlestick is formed when both bulls and bears push prices up and down during a session, but ultimately the closing price ends up close to the opening price.
The bearish spinning top indicates that, although buyers initially held control, sellers countered strongly within the same session. This indicates a potential bearish reversal, which is validated when the subsequent candle has a large red-coloured body. The bullish spinning top is a green-coloured candlestick with a small body positioned near the center of the candle’s range, along with equal or nearly equal wicks. The market opens and closes near the same level, resulting in a small body. The pattern can form during an uptrend or a downtrend, often indicating a potential reversal or a pause in momentum. While not a standalone signal, it can signify important turning points when paired with other indicators.
Hence, there is usually a noteworthy price action movement when these two lines cross over, indicating a shift in market sentiment, and you can use this to guide your trailing stop decision. Finally, we would also like to show how prevalent indecisive candles—such as the spinning top—are in non-trending market conditions. In this example, we can see that there is no clear trend, and the price is bouncing back and forth within a set range. In this case, the spinning top does not serve any meaningful use, as market sentiment is already unclear and moving in a sideways manner. The tops tell you buyers or sellers are firstly interested in wanting price to reverse – why else would they start battling the other side? – and secondly, that a reversal signal could be near… not necessarily on the next candle, but within a short space of time on the time-frame you’re watching.
The candle that follows needs to stay in the established sideways channel. Another simple yet effective filter could spinning top candlestick be to demand that the close is the highest close five bars back for an overbought market, and the lowest close 5 bars back for an oversold market. The two patterns are nearly identical, with very small differences that in fact are negligible. If you have read about the Doji pattern, you might be a little confused by now, since it closely resembles a spinning top. However keeping in mind the 2nd rule, i.e. ‘be flexible, verify and quantify’ even if there is a wafer-thin body, the candle can be considered a Doji. LiteFinance Global LLC does not provide services to residents of the EEA countries, USA, Israel, Russia, and some other countries.
Conversely, traders must exercise caution and await further confirmation signals if the expected reversal fails to materialise. A confirming candlestick would typically stay within the established sideways channel in a ranging market, reinforcing ongoing indecision. As one can observe, the formation of the first spinning top candlestick occurred on May 31, 2018. Typically, it indicates indecision in the market as neither the buyers nor the sellers dominate the trading session.