This means that the bulls will take control at the bottom of a downtrend, and they may take the reins. A spinning top that lands during a strongly trending market, for example, can indicate a future reversal. 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. To sum up, the spinning top candle shows confusion and indecision in the market with an equal probability of reversal or continuation.

This shows an even higher degree of uncertainty, as another indecisive candle forms instead of being followed by either a trend reversal confirmation candle or a trend continuation candle. This market condition reflects a prolonged battle between buyers and sellers to gain control of the price. Active traders should not trade instantly after the formation of a spinning top but rather wait for the confirmation from technical indicators after the formation of the next candle. It will help eliminate uncertainties in the market since the signal trend reversal will have been established. The spinning top candlestick is versatile and can appear in bullish and bearish patterns. While it doesn’t necessarily indicate a trend reversal by itself, it’s often found within patterns that do.

Spinning Top Candlestick with Moving Average Convergence/Divergence (MACD)

When analyzed with the subsequent candle, it can be effectively used in trending markets as a reversal or continuation tool. The dragonfly doji’s distinct difference in appearance is its little to no real body coupled with relatively long lower shadows or wicks. Similar to the hammer and bullish pin bars, dragonfly dojis are also bullish reversal patterns that appear in downtrends. As shown, we can observe a downtrend before the spinning top candle occurred. The pattern was then followed by a bullish candle that served as a reversal—indicating that market sentiment had shifted from bearish to bullish. In contrast, bearish spinning tops are also followed by a “confirmation” candle, which is a bearish candle closing either within the spinning top’s lower wick or below its low.

You can practice with over three years of real tick data at multiple replay speeds to determine which pattern works best with the candlestick. For one, in a bullish spinning top, the price opened sharply higher and provided signals that bulls are doing well. However, as this happens, sellers come back in and push the price lower close to the opening price.

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. This can be done by observing the price action after the spinning top candle forms. Look for a break above the candle’s high (bullish spinning top) or below the low (bearish spinning top) to confirm the direction of the next price movement. As previously discussed, spinning tops are most effective when complemented with other patterns and indicators.

Spinning Top Candlesticks: A Trader’s Guide

The moving average is more sensitive to price fluctuations when the time period is shorter. Moving averages are used by traders to identify potential buy and sell signals, with crossovers between moving averages being a popular signal. Moving averages can also serve as levels of support and resistance, with prices frequently bouncing off of them. Spinning tops are a common candlestick pattern, and they work best with other forms of technical analysis. Indicators or other forms of analysis, such as those helping to identify support and resistance, may help make better decisions based on candlestick patterns.

Can Be Used to Track the Day’s Bias

Neither the bulls nor the bears could establish any influence on the market as this is evident with the small real body. Thus Spinning tops are indicative of a market where indecision and uncertainty prevails. It’s critical to understand market trends and trading tactics in order to maximise gains when trading in a bullish market. The first step is to recognise the trend by looking for a series of higher highs and higher lows in price movements, which indicates that the market is in an uptrend. You can select securities that are likely to gain from the bullish trend once the trend has been discovered, such as equities or ETFs that track the general market or specific sectors.

When you think of the Spinning Top candlestick pattern, think of an actually spinning top. 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. If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. This will be the most conservative stop level, and if the stock continues to chop, you could be stopped out. The entry on the trade is above the top of the candlestick for longs and below the candlestick for shorts.

1. This generates a bullish signal, and when the price goes below the moving averages, it generates a selling signal.
2. Discover the range of markets and learn how they work – with IG Academy’s online course.
3. 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.
4. The next period opens lower and closes even lower, confirming a bearish reversal.
5. Traders who understand these patterns can use them to spot potential reversals or trend pauses, making the spinning top an invaluable tool in technical analysis.
6. Bearish Spinning top candlestick pattern shows uncertainties around an underlying asset.

A confirming candlestick would typically stay within the established sideways channel in a ranging market, reinforcing ongoing indecision. Another error is calculating that a bearish spinning top will mean that there are chances of a bearish reversal in a market. The tools used for technical analysis of a stock are not 100% accurate, so it is important spinning top candle to use them carefully as they indicate overall indecisiveness in markets. Aggressive traders can also make a move and bet on trend reversals without analyzing if it is a bearish or bullish spinning top. Ichimoku Cloud is a technical analysis tool that helps traders identify potential trend reversals, support and resistance levels, and momentum shifts.

Bearish Spinning Top: Definition, Indication, Example, and How It Works?

1. The third bearish candle shows that the bears are back in the market, and a reversal is going to take place.
2. While spinning tops are a prevalent candlestick pattern, they are most effectively used alongside other technical analysis tools.
3. A trader went long on the closing of the bullish candle that followed the spinning top.
4. In comparison to other candlestick patterns, spinning tops are less definitive.
5. However, unlike the doji candlestick pattern, the hammer pattern is mainly used as a bullish reversal pattern during downtrends.

In which way, the price will eventually move is not certain; however, what is certain is the movement itself. If the stock starts to fall, the trader can exit the trade and book a loss. At least the loss is just on half the quantity and not really on the entire quantity. There are other types of bullish patterns in the stock market, including the bullish engulfing pattern, the morning star pattern, and the hammer pattern. There is a clear distance between the highest and lowest price of the day here, but the closing price is only slightly above the opening price. Finally, the fourth variation shows two consecutive bearish spinning top pattern.

Confirmation from other technical tools is necessary while forecasting future action plans, as this is quite a common pattern and may not mean something consequential. The risk-reward potential of placing stop loss targets just above or below the high or low of a spinning top is also quite low. It means you may be dealing with a higher risk in comparison to the expected reward.