spinning top candlestick 3

ByGeorge Buttler

Spinning Top Candlestick Pattern Explained

It is not a standalone signal and should be confirmed by subsequent candlesticks. A Spinning Top is a neutral candlestick pattern that signifies uncertainty in the market. It features a small bullish (white or green) or bearish (black or red) body with long upper and lower shadows. The body should be much smaller than the total length of the candlestick, confirming an equilibrium between buyers and sellers.

In a weaker trend it may indicate that the market is consolidating or correcting before continuing with the trend. It is therefore important to obtain confirmation before acting upon the Spinning Top pattern. Confirmation is achieved when the candlestick that follows the Spinning Top closes higher or lower than the Spinning Top. The Spinning Top is a single candlestick pattern with a relatively small real body and an upper and lower shadow that is longer than the length of its real body. In other words, the open and the close of the Spinning Top are near to each other, which renders the color of the Spinning Top’s real body as not of significance.

While both have small bodies, Doji candles have almost equal opening and closing prices forming the tiny real body of the candle, as well as much shorter upper and lower shadows or wicks. With both of these variations, context is king – always look at the subsequent candles and the prevailing price trend. Let’s use a hypothetical example – a stock in a long-term downtrend prints a bearish spinning top. Although it isn’t a bullish candle, it does indicate that the bears have run into a bit of trouble – and if subsequent candles confirm it, this can be the start of a reversal. Candlestick charts are an important tool for technical analysis, and spinning top candles are a dime a dozen.

While they are limited on their own, spinning top candles can lead you to plenty of opportunities that you might have otherwise missed. Alternatively, if a spinning top occurs during a period of sideways trading, it’s simply a sign of more indecision – and a hint that one should move on to greener pastures. However, context is key here – looking at the previous candles, it is clear that the index was in a sustained downtrend. The appearance of a spinning top – bearish or not, indicates that uncertainty has entered the market.

  • Carefully check the body size and shadow symmetry before labeling the candle.
  • Antonio Di Giacomo studied at the Bessières School of Accounting in Paris, France, as well as at the Instituto Tecnológico Autónomo de México (ITAM).
  • Traders rely on various tools to gain insights into market behavior, and candlestick patterns are one of the most trusted visual indicators.
  • 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 Bullish Engulfing candlestick pattern is formed by two candles.

Let’s say you spot a spinning top in a stock that’s been on an uptrend. You might wait for the following candle to prepare for a potential price drop. If it closes bearish, you could short the stock with a stop-loss above the high of the spinning top. Analysing the reward potential of this pattern is also hard since the candlestick pattern does not offer a price target or an exit strategy.

  • We teach day trading stocks, options or futures, as well as swing trading.
  • So, a series of green candles with higher highs and higher lows (for uptrends) or a series of red candles with lower highs and lower lows (for downtrends).
  • A spinning top candle marks a point of indecision about the asset’s future.
  • Among these, the spinning top candlestick pattern holds a significant position.
  • Traders commonly use spinning tops alongside the Relative Strength Index (RSI), Moving Averages (MA), and Bollinger Bands to strengthen their analysis.

Scenario #4: During a Downtrend – Followed by a Continuation Candle

Liberated Stock Trader, founded in 2009, is committed to providing unbiased investing education through high-quality courses and books. We perform original research and testing on charts, indicators, patterns, strategies, and tools. Our strategic partnerships with trusted companies support our mission to empower self-directed investors while sustaining our business operations. After conducting 9,894 trades on 568 years of data, I confirm the Spinning Top profit per trade to be 0.49%. A 0.49% win rate means trading a Spinning Top long will net you an average of 0.49% profit per trade if you sell after ten days.

Can spinning top candlesticks be used in different markets?

This 3-candle bullish candlestick pattern is a reversal pattern, meaning that it’s used to find bottoms. This 2-candle bullish candlestick pattern is a reversal pattern, meaning that it’s used to find bottoms. This 1-candle bullish candlestick pattern is a reversal pattern, meaning that it’s used to find bottoms.

Scenario #1: During an Uptrend – Followed by a Confirmation Candle

Imagine a strong bullish trend where the price has been climbing steadily over several days. As the price hits a new high, a spinning top forms, with long shadows and a small body. The next day, a large bearish spinning top candlestick candle follows, signaling that buyers are no longer in control and that a reversal may be underway.

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