spinning top candlestick pattern 8

Spinning Top Candlestick: How to Identify, Interpret, and Trade It Successfully

Much like the Doji candlestick pattern, spinning tops usually appear at the top or bottom of a trend and signal indecisiveness in the market and therefore, are considered neutral candlestick patterns. The spinning bottom is a term that is sometimes used to describe the bullish version of the spinning top (i.e., a candle forming at the bottom of a downtrend to hint at a potential bullish reversal). However, traders typically use ‘spinning top’ for the same candle structure regardless of the context in which it forms. Most traders use indicators to confirm the signal of a spinning top and gather more facts on the price trends. Trading with the spinning top pattern can be done using derivatives like trading contracts for difference (CFDs).

Swing Trading Signals

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. High trading volume during the formation of a spinning top can add weight to the signal, suggesting that the indecision is significant and may lead to a notable market move.

• When trading a Spinning Top, it is important to confirm the signal with a subsequent candlestick.
• A spinning top candle marks a point of indecision about the asset’s future.
• It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance.
• Moreover, no candlestick formation guarantees a trend reversal, not even a common candlestick pattern.
• This impacted major tech companies like Alphabet (GOOG) and Tesla (TSLA), whose Q2 results put pressure on AAPL’s stock price.
• The only way to do this is by looking at subsequent candles for confirmation.

What Is a Bullish Spinning Top Candlestick?

But the pattern represents bearish tendencies or sentiments whenever these candlesticks at resistance levels are black or white. Another important event in the history of bearish terms in the stock market is the 2008 recession. A global financial slowdown was witnessed after the subprime mortgage crisis in America. This was followed by the collapse of Lehman Brothers Holdings Inc., which is one of the biggest financial institutions in the world.

• This is represented as a red candlestick that opens above the previous green body and closes below its midpoint.
• The context in which the spinning top pattern appears can give clues about its reliability as a reversal signal.
• The candlesticks are made of three long, bearish bodies that do not have long shadows and open within the real body of the previous candle in the pattern.

A stop-loss order is typically set beyond the high or low of the Spinning Top candlestick — below the low for long trades and above the high for short positions. 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. A breakout of the bullish Spinning Top’s high indicates a potential uptrend, while a breakout of the low indicates a bearish trend. Some of these patterns have different names, depending spinning top candlestick pattern on whether they are …

Spinning Top Candlestick Explained: Patterns, Strategies, and Insights

The third variation shows two consecutive bullish-colored spinning top pattern. The second variation shows a bullish-colored spinning top followed by a bearish-colored spinning top candle. The first variation above shows a bearish-colored spinning top followed by a bullish-colored spinning top candle. Spinning tops can be spotted on a variety of chart time frames from minutes to monthly.

Depending on the platform that you’re using, bullish spinning tops can be printed as green or white. The long wicks indicate that the price has moved significantly up and down before settling close to the opening price. The length of the wicks is a sign of volatility in the market – both the bears and the bulls attempted to have their way, but we ended up very close to where we started. Looking at previous candles or at a longer time frame gives us an idea of the prevailing trend, as well as its strength – and looking at subsequent candles confirms or denies that a reversal is occurring. Understanding market sentiment is a tall order – there are countless factors at play, but there is a way to neatly summarize those factors, and they are called chart patterns. These indicators work synergistically with spinning tops to provide a more comprehensive view of market conditions.

The appearance of a spinning top indicates that the market is in a state of uncertainty, reflecting an approximate balance of power between buyers and sellers. Of course, there are other types of candlesticks that you should learn about. And even so, candlestick analysis alone is not enough to trade successfully. In order to form a complete trading strategy, you need to understand the basic math of trading, order types, and trading psychology.