Spinning Top Candlestick: How to Trade the Spinning Top Pattern
Together, candlesticks form a chart which can be used for traders to analyze the price movement of various patterns, including cryptocurrencies. It can occur after a bullish or bearish trend, signaling a potential reversal or a general sign of market indecision. Volume adds a second dimension to trading by showing the activity behind a price move. The small real body of the spinning top suggests that neither bulls nor bears have taken control, resulting in minimal net movement from open to close.
Can Falsely Signal Indecision/Uncertainty During Long-Term Trends
In contrast, a doji candlestick pattern usually has no real body and relatively much shorter wicks. There is no difference in how both are used, as they can be used effectively in both uptrends and downtrends, except, of course, during non-trending periods. Relying on a Spinning Top as the sole signal to enter a trade is highly risky.
What it takes to stop losing trading
Here, in a prevailing downtrend, the price formed several Spinning Top candlesticks but failed to reverse. The Spinning Top candlestick is a pattern, that has to be viewed in the context of the overall market conditions. The only way to do this is by looking at subsequent candles for confirmation. While they are limited on their own, spinning top candles can lead you to plenty of opportunities that you might have otherwise missed. A spinning top doesn’t always lead to a reversal – but even those cases are significant when practicing proper risk management. Sideways action is a very common occurrence – and although that conclusion is less usable than a trend reversal, it is still usable.
- Even if no reversal occurs, the pattern is still highly usable – either as a signal to close positions or change your strategy and approach.
- You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources.
- Therefore, long trades can be considered with targets at the nearest resistance levels.
- Yes, it clearly shows indecisiveness and uncertainty, but indecisiveness is not a direction; it’s just a state during a point in time.
Besides, it is crucial to consider market volatility, as you may need to place a stop-loss order slightly further away to prevent a trade from getting closed prematurely due to market noise. Although a Spinning Top candlestick pattern represents indecision in the market, the pattern by itself is not reliable and should be confirmed with other indicators. A Spinning Top typically forms during a strong trend and can signal either a continuation or a potential reversal. It is essential to check technical indicators and carry out a fundamental analysis to interpret the signal correctly. A Spinning Top candlestick pattern indicates uncertainty in the market, often appearing during a sideways trend or a consolidation phase.
- The structure of a spinning top highlights market indecision, showcasing the balance between buying and selling pressures.
- However, large or full-bodied candles are telling as a subsequent spinning top usually signals slowing momentum.
- Therefore, the subsequent candle needs to be analyzed alongside the spinning top to determine whether this uncertainty leads to a continuation reversal of the trend.
- The indecision could indicate more sideways movements, especially when the spinning top occurs within an established range.
- So, a trader would enter on the break of the spinning top’s high or low, depending on the anticipated direction.
The closing price is near the middle of the candle, but slightly below the opening price. The screenshot below shows two examples of the spinning top pattern on the daily chart of Apple (AAPL) stock. While there may be more of these patterns on the chart (the exact number is difficult to determine due to the subjectivity of analysis), we will focus on examining these two specific examples. The opening and closing prices are close to each other, indicating minimal price change during the period. Analyzing all these factors together helps improve the effectiveness of trading with a Spinning Top candlestick pattern.
To effectively incorporate the spinning top pattern into a trading spinning top candle strategy, it is essential to consider several factors. Tamta is a content writer based in Georgia with five years of experience covering global financial and crypto markets for news outlets, blockchain companies, and crypto businesses. Tamta’s writing is both professional and relatable, ensuring her readers gain valuable insight and knowledge.
Analysing the reward potential of this pattern is also hard since the candlestick pattern does not offer a price target or an exit strategy. Spinning tops are a common candlestick pattern, which means they work in conjunction with other forms of technical analysis. Multi-timeframe analysis (MTA) and other specialized methods can take your trading to the next level.
Technical Analysis
Early market sentiment seems neutral, but as the morning progresses, a sudden influx of positive news regarding cryptocurrency regulations creates a surge of buying interest. The shadows tell the traders what were the opening, closing, highest, and lowest rices within a specific timeframe. As such, you need to use this candle pattern as another confluence trading tool to predict a trend reversal and combine it with other technical indicators in order to confirm the reversal. One advantage is that it works across different time frames, making it suitable for both short-term and long-term strategies. It can also act as a pause signal in an ongoing trend, allowing traders to prepare for possible entries or exits.
