It means that the trader does not need to own the underlying assets but can speculate on their price pattern. 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.
Bearish Spinning Top Candle
This placement helps account for the pattern’s characteristic volatility while potentially protecting against unexpected movements. PrimeXBT (PTY) LTD acts as an intermediary between the investor and the market maker, which is the counterparty to the products purchased through PrimeXBT. Gold trading is one of the more popular ways to trade commodities online. If you want to diversify your portfolio, engaging in silver trading through the CFD market can be a fantastic option…. Near support and resistance levels, or after extended trends, where indecision can hint at weakening momentum or the start of a shift.
- Implementing these takeaways can transform your trading approach, leveraging the spinning top candlestick pattern to achieve greater market success.
- The candle has a small body, long wicks, and seeing as it is bearish, the opening price was higher than the closing price.
- A long upper wick indicates selling pressure, while a long lower wick indicates buying pressure.
They are visual formations created by price movements within a set period, reflecting the psychology of buyers and sellers. Variations like the Spinning Top or Long-Legged Doji add longer wicks, emphasizing confusion and volatility. The Dragonfly Doji, with its long lower shadow and no upper wick, often signals potential reversal after heavy selling.
But the real insight comes from comparing body and wick sizes. A long wick shows rejection or indecision, while a large body reveals conviction. A spinning top has a small body with visible discrepancies between opening and closing prices, whereas a doji’s body is almost non-existent. Traders typically observe if the price breaks above the candle (bullish spinning top) or below the candle (bearish spinning top) to determine the likelihood of a reversal.
Is a Spinning Top Candle Accurate?
- By understanding its formation and trading it effectively, you can enhance your trading strategy and potentially maximize your profits.
- Think about where this candle pops up in the bigger trend or price pattern to really get a feel for what it’s trying to tell you.
- The second and last example is a bullish spinning top on the Ethereum daily chart.
- Spinning top candlestick is a pattern with a short body between an upper and a lower long wick.
- The spinning top candlestick chart pattern develops when buyers and sellers reach an equilibrium, leading to minimal changes between opening and closing prices.
- Such an analysis will protect the trader from straying away from the trading pattern and stick within the risk management plan.
A bearish reversal on a powerful bull run often leads to frustration, not profits. Spinning top candlesticks are found on stock charts and could be a bullish or bearish reversal sign. A spinning top candlestick is a sign of indecision in the market. It has a thicker real body and can also be found in consolidation areas. Look for a price break above or below the candle to confirm direction.
What Are Similar Patterns To The Spinning Top Pattern?
Spinning top candles are often confused with doji candles, another common and intuitive chart pattern. Doji candles, however, are much rarer and come in a variety of types, all of which signal different things. However, context is key here – looking at the previous candles, it is clear that the index was in a sustained downtrend.
Bearish Pennant Pattern: How to Use it in Trading
All of the data that is available suggests that, performance-wise, both bullish and bearish spinning tops behave in the same way. Even at a more abstract level, both of these variations suggest the same thing – indecision. A stock chart pattern depicting a bullish spinning top and its subsequent decline, after an uptrend. In the middle of a longer downtrend, a green spinning top – a bullish spinning top, is printed. After a long period of dropping prices, both the bulls and the bears are evenly matched – and this sets the stage for increasing investor confidence and an upswing.
Chart Patterns & Candlestick Patterns Cheat Sheets
2 hours later, 3 consecutive big bearish pin bars form, telling you the bears have probably won the battle and that price could be about to fall, which it then does. So we need to wait for more signs price could be about to reverse before entering a trade. After a sharp rise, Eur/Usd moves into a supply zone and begins to show bearish price action.
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These are just a few of the insights you can get from seeing a spinning top appear, which is why I think it’s one of the most important candles to lookout for. Each top represented a significant battle between the bulls and bears; bears wanted price to keep falling, bulls wanted higher prices. Once they did, no buyers were left to stop price falling, resulting in a sharp decline before a new battle commenced at a lower price. Whoever’s come into the market to battle the other side REALLY doesn’t want price to continue in its current direction. You don’t know which way, though the expectation is obviously bearish given the recent drop, so you wait for more price action.
Profit targets might be aligned with key price levels visible on the chart, such as recent highs or lows. For traders expecting trend continuation, these targets might extend further, while those anticipating a reversal might aim for closer levels. It’s important to note that the spinning top candle is neutral and can be either bullish or bearish depending on its context within the price chart. Conversely, in a downtrend, another top emerges, indicating possible weakening bearish momentum.
Most consider a spinning top candlestick a neutral pattern due to the indecision displayed during the trading day. So, it is very important to wait for the next day’s opening price to assess which way the asset price might be heading. A Spinning Top candlestick is a common technical analysis chart pattern indicating market indecision.
Indecision patterns warn traders that neither side is firmly in control. Continuation patterns help traders recognize when a trend spinning top candle is consolidating rather than reversing — valuable insight for managing open positions. Every pattern represents the emotional state of traders — fear, greed, indecision, or conviction.
The spinning top is not exclusively used as a bullish reversal or bearish reversal. 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.