spinning top candlestick

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The Spinning Top candlestick pattern is most effective at these particular points. 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 Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.

The Spinning Top Candlestick Pattern – Pros and Cons

The main difference is a spinning top always has long wicks or shadows on either side, indicating a large variance in the high and low. A spinning top also signals weakness in the current trend, but not necessarily a reversal. In the above chart, a spinning top candlestick (the first candle of the engulfing pattern) appeared at the end of a pullback. It consists of consecutive long green (or white) candles with small wicks, which open and close progressively higher than the previous day. After price falls and a bearish engulf forms (also a good reversal signal – and probably the better entry option), price begins to move sideways, and another spinning top appears. Spinning tops don’t have many practical uses compared to the typical candlestick patterns we use – like pins, engulfs, inside bars, etc.

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The bulls sent the price high and the bears sent the price low. To trade when you see the https://g-markets.net/ pattern, you can use derivatives such as spread bets or CFDs. With derivatives, you don’t take ownership of the underlying assets, but speculate on their price movements.

Dual Momentum Trading Strategy (Gary Antonacci)

However, when a spinning top is at the base of a downtrend, it is a sign that the bearish is losing control, and the bullish may take control. The best way to learn to read candlestick patterns is to practise entering and exiting trades from the signals they give. If you don’t feel ready to trade on live markets, you can develop your skills in a risk-free environment by opening an IG demo account.

This resulted in the closing price reverting back/very close to the opening price. A spinning top is a one-candle reversal pattern that signals uncertainty in the market, and is preceded by either an uptrend or downtrend. As to its appearance, a spinning top has a small body that closes in the middle of the candle’s range, with long wicks to both sides.

How to identify a Spinning Top candlestick pattern?

A spinning top indicates exhaustion after a cycle of uptrends or downtrends price pattern. The gap between the opening price and closing price means that no progress was achieved during the timeframe of the candle. The long upper and lower wick displays a higher level of volatility that occurred during the trading period, with neither bulls nor bears dominating. Dojis are smaller, with small real bodies and small upper and lower shadows.

As for forecasting reversals, the common nature of spinning tops also makes this problematic. Confirmation is required, but even with confirmation, there is no assurance the price will continue in the new direction. Many traders would wait for the confirmation and not enter the trade immediately after the emergence of the Spinning Top pattern.

How to trade the pattern?

It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career. Traders interpret this pattern as the start of a bearish downtrend, as the sellers have overtaken the buyers during three successive trading days. A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up. The colour of the body can vary, but green hammers indicate a stronger bull market than red hammers. So again, DO NOT use spinning tops as reversal signals, they don’t work.

spinning top candlestick

Spinning top gets higher importance when it occurs at a pivot level , support or resistance and Fibonacci level. However, considering the length of shadows the same, doji are more potent. In late November 2021, the S&P 500 made multiple spinning tops. So, assure that confirmers are in the chart to place a new trade. The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms. We provide our members with courses of all different trading levels and topics.

A spinning top candlestick pattern represents indecision in the market between buyers and sellers at a certain period of time. It is, therefore, used by forex traders to decide whether a trend reversal might occur. After a strong price advance or decline, spinning tops can signal a potential price reversal if the candle that follows confirms. A spinning top can have a close above or below the open, but the two prices are always close together. Spinning top is a Japanese candlesticks pattern with a short body found in the middle of two long wicks. The upper and lower long wicks, however, tell us that both the buyers and the sellers had the upper hand at some point during the time period the candle represents.

Spinning tops can occasionally indicate a substantial shift in the trend. At the peak of an uptrend, a spinning top may indicate that bulls are losing control and the trend may be about to change. This pattern is not as reliable as engulfing, harami, and counterattack candlestick patterns. Because a spinning top is a single candlestick pattern and has a small body, it is not very reliable.

Statistics to prove if the Spinning Top pattern really works

But they also indicate one side of the market (bulls or bears) believe the current price is too high or too low. You won’t have much trouble identifying the spinning top – it’s one of the most common candlesticks, so you’ll see it pretty much everywhere. One of our favorite indicators to define overbought and oversold conditions is the RSI indicator. The traditional interpretation is that readings above 70 signal an overbought market, and readings below 30 an oversold market. In our experience, the significance of a pattern can be greatly impacted by volume. Some patterns will work great when there is low volume, while others will only work in extremely high volume conditions.

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