Spinning Top Candlestick Pattern What It Is, Examples, Trading
Knowing how to properly use this common Japanese candlestick pattern in your analysis can bring about plenty of trading opportunities that you might have otherwise missed. Spinning top candlesticks are a type of candlestick that signals high levels of uncertainty. They tend to show up during market indecision, reversals, consolidation, and peak volatility.
The Spinning Top Formation
While the immediate response saw a slight pullback, the overall uptrend continued, demonstrating that not all spinning tops lead to reversals. This example underscores the importance of context and confirmation when interpreting spinning top signals. 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. Meanwhile, the long upper and lower shadows reflect significant volatility within the trading session.
The bulls are losing control when spinning top candlesticks occur at the top of a bullish trend. 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 spinning top candlestick patterns that appear in downtrends. However, their appearances are almost the complete opposite of each other. While the spinning top candlestick pattern has a short body and long wicks, the marubozu has a long body with little to no wicks. The spinning top candlestick has a distinct structure that reflects a moment of uncertainty in the market.
How is a Spinning Candlestick Formed?
- Still, doji that appear at the right time can have significant implications on future price action.
- This will help you in predicting exactly when price is going to reverse from a level or zone.
- As always, we must wait for price action signals – like pin bars, engulfs, etc – to confirm price is about to move away.
- Below is an example of Apple’s stock price from October 2022 to April 2023.
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The Three White Soldiers candlestick pattern is formed by three candles. The Bullish Engulfing candlestick pattern is formed by two candles. The Japanese candlestick chart patterns are the most popular way of reading trading charts.
- Regardless, proper risk management strategies, including setting appropriate stop-loss levels and take-profit targets, are essential when trading the spinning top.
- On its face, the spinning top looks like a humble candle with a small real body, but in reality, there were a few dramatic events that took place during the day.
- On the other hand, a spinning top in an uptrend might precede a bearish reversal pattern, such as the evening star.
Again, the color is irrelevant for the pin bar; the important aspect to look at is the shape. However, pin bars usually have relatively larger real bodies and a small wick at the opposite end of the candle’s long wick. 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.