Spinning Top Candlestick Pattern What Is And How To Trade

This is viewed as a failed attempt by the bears to drive the markets down. However, a trader needs to apply technical indicators and signals to analyze the trading movements. Such an analysis will protect the trader from straying away from the trading pattern and stick within the risk management plan. Traders should look for a candlestick with a small real body and a long upper shadow to identify a bullish spinning top pattern. The long upper shadow and lower shadow in the given image suggest that the market was highly volatile during the time period. The highest price point of the day and the lowest price point of the day are significantly distanced.

Hence, this pattern can signify a “decision point” on whether the trend continues or if a reversal appears. The spinning top and doji are both neutral one-candlestick patterns that signify indecisiveness and uncertainty about where the price is likely headed. The difference is that spinning top candlesticks usually have real bodies—despite how small they may seem—and much longer wicks on both sides.

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It is important to the traders that they are cautious about their long positions when the bearish reversal candlestick patterns are formed. Bearish spinning top candlestick pattern Spinning top candlestick pattern shows uncertainties around an underlying asset. The shadows or wicks will indicate any decisive trend reversal and necessary information for trading strategy. It has a long red body followed by 3 small green bodies followed by another red body. A neutral candlestick pattern, such as a spinning top, illustrate the current indecisive market sentiment. The asset is neither bullish nor bearish, and the price is at or near equilibrium.

Can Be Used to Track the Day’s Bias

Typically, a 20% or greater shift from a recent peak or trough signals the start of a “official” bear or bull market. If the spinning top occurs at the bottom of a downtrend, it could signal that a bullish reversal may happen. Conversely, if the spinning top occurs at the top of an uptrend, it could suggest a bearish reversal. Spinning top candlesticks are common, which means many patterns will be inconsequential. Spinning tops frequently occur when the price is already moving sideways or is about to start. Spinning top candlesticks are characterized by compact bodies and long upper and lower shadows, resembling a child’s toy top.

In contrast, a long red candle is regarded as a bearish candlestick pattern as it shows that the price has continued to go down since it opened that day. A spinning top chart pattern can provide a possible entry point when utilizing a momentum trading approach. This is because highly volatile assets that reflect a high degree of interest from market participants tend to move fast and sharply over a short period of time.

How Can I Identify a Bullish Spinning Top Pattern?

1. RSI is most effective in the ranging or sideways market and also confirms the reversal of the trends.
2. Assessing the reward potential of a spinning top trade is also difficult since the candlestick pattern do not provide a price target or exit plan.
3. A tall upper shadow means that the bulls tried to push the market higher but did not succeed.
4. We simply want to show that even “neutral” candles can have a bias toward a specific direction.

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. The formation of the candlestick indicates a level of indecision among buyers and sellers, which depicts price reversals, hence creating a neutral pattern. However, the pattern of the candlestick is mostly found within an uptrend, a downtrend, and a sideways movement, indicating a potential reversal. The bullish trend increases the price further, while the bearish trend lowers the price until the overall price closes where it opened. Ichimoku Cloud is a technical analysis tool that helps traders identify potential trend reversals, support and resistance levels, and momentum shifts. It was developed by a Japanese journalist named Goichi Hosoda in the late 1930s and has gained popularity among traders worldwide.

Forecasting reversals can be challenging because spinning tops can only spin in one direction. Even if the price moves in a different direction after confirmation, it doesn’t guarantee that it will remain there. However, it is essential to be aware of the overall market context and to consider factors such as support and resistance levels, as well as the strength of the prevailing trend. The equal length of the upper and lower wicks indicates that both buyers and sellers are active in the market and are struggling for control. It formed in a solid downtrend; therefore, if a trader used it as a signal of a trend reversal, they would fail.

Spinning Top Candlestick Pattern

If the trader wants to buy 500 shares, he could probably enter the trade with 250 shares and wait and watch the market. If the market reverses its direction, and the prices start going up, then the trader can average up by buying again. If the prices reverse, the trader would most likely have bought the stocks at the lowest prices. As seen in the short body of the candlestick, the market didn’t change much when it closed versus when it opened.

The visual representation of a spinning top candlestick shows a small central rectangle (the body) with extended lines above and below (the shadows or wicks). The body can be either bullish (white or green) or bearish (black or red), but its small size remains a key feature. The length of the shadows can vary, but they are usually longer than the body, highlighting the market’s volatility and uncertainty during the trading session. The bullish spinning top pattern occurs at the bottom of a downward trend and may signal a bullish trend reversal. Usually, when the pattern is formed, the chances of a trend reversal are very high as the asset enters a price consolidation mode. Doji candles resemble a cross or plus sign, depending on the length of the shadows.

1. When combined with the spinning top pattern, these tools offer a more comprehensive picture of market sentiment and potential future price trends.
2. AltFINS crypto screener allows traders to create custom filters based on Candlestick patterns.
3. In fact, relying on the spinning top as a standalone tool to determine future price direction is simply irresponsible, especially for beginners.
4. The pattern indicates a strong buying pressure that overwhelms the selling pressure and suggests that the price is likely to continue rising.
5. A bullish engulfing pattern is a chart pattern that can be used to identify a possible downtrend reversal.
6. Confirmation would typically involve a subsequent candle closing clearly above or below the trend line.

This period is usually referred to as ‘pause days’ and is characterized by relatively shorter candles after a parabolic move and before the asset moves once again with high momentum. A spinning top indicates exhaustion after a cycle of uptrends or downtrends price pattern. The gap between the opening price and closing price means that no progress was achieved during the timeframe of the candle. The long upper and lower wick displays a higher level of volatility that occurred during the trading period, with neither bulls nor bears dominating. The idea behind indecision manifested in the market throughout the formation of the spinning top is that buyers and sellers move prices higher and lower during the trading process.

Then, watch out when the RSI starts to point up, as it can serve as a leading indicator of a possible change in market sentiment. A bullish engulfing pattern is a chart pattern that can be used to identify a possible downtrend reversal. It happens when a small bearish candle is followed by a larger bullish candle that engulfs the previous candle completely. This pattern suggests that buyers have taken control of the market and are driving up prices.