Spinning Top Candlestick Pattern: How to trade & Examples Finschool By 5paisa

As such, you need to test the strategies and patterns you want to use, before trading real money. In this guide, you’ve learned not only how to identify a spinning top pattern, but also how you could go about to improve the accuracy of the pattern for real trading. The volatility of the market could have a great impact on price patterns and their accuracy.

The lower shadow connects the lowest price of the day with the real body. In this chart, we have the perfect combo to enter a short-selling position – that is, spinning top pattern, double top pattern, and the intersection at the 61.8% Fibonacci level. As you can see, the market stopped exactly at the 61.8% Fibonacci level where the spinning top pattern was formed. Shooting star generally comes at the end of an uptrend and indicates bearish reversal , whereas Spinning top indicates indecision in the market. Hammer generally comes at the end of a downtrend and indicates bullish reversal , whereas Spinning top indicates indecision in the market.

How does the Spinning Top pattern look in real life?

Some patterns will work great when there is low volume, while others will only work in extremely high volume conditions. So, in this case, a spinning top signals that an extended period where selling pressure prevailed might be coming to an end. Since a spinning top can form both in an uptrend and downtrend, we’ll just exemplify with one that appears in a downtrend. The information on this website is prepared without considering your objectives, financial situation or needs. Consequently, you should consider the information in light of your objectives, financial situation and needs. The third spinning top is exceptionally large compared to the candles around it.

• Each session opens at a similar price to the previous day, but selling pressures push the price lower and lower with each close.
• The wicks will also have some size variation in them – bigger wicks mean a bigger battle went on.
• The three black crows candlestick pattern comprises of three consecutive long red candles with short or non-existent wicks.
• We love the diversity of people, just like we like diversity in trading styles.
• In this article, we’re going to take a closer look at the spinning top candlestick pattern.

Since market is known for its indecision based behavior, this candlestick patter appears very often in the market. It has a reversal implication if there are enough supporting signals. The fact that the lower shadow is present indicates that the bears did try to drive the market lower. The real body would have been a long red candle as opposed to a small candle if the bears had been successful.

What Does a Spinning Top Tell Us About the Market?

The open price and close price are relatively near, as indicated by the little real body. To ensure the effectiveness of the spinning top candlestick strategy, it is important to combine it with other strategies. This way, you are able to check and see if other strategies agree with it.

To trade when you see the spinning top candlestick 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. This means you can trade rising and falling markets to take action after both bullish and bearish spinning tops. Our final two chart images show the same spinning top forex patterns that appeared during a bullish trend.

Are Candlestick Patterns Reliable

The chart example above shows two instances where the spinning top pattern formed. For instance, if the open price is Rs. 320, and the closing price is Rs. 324, then this will lead to the creation of a small real body as a 4-point move is not much. HowToTrade.com helps traders of all levels learn how to trade the financial markets. Because the open and close price points are very near to one another, the color of the candle does not really matter. It could be a green or a red candle, what actually matters is the fact that the open prices and close prices are near to one another.

The Spinning Top candlestick pattern is advantageous for the traders in the sense that it is much stronger in a trending market. Whether it be in an uptrend or a downtrend, it indicates a balance of bullish and bearish forces. It tells traders that the opposite direction of the market has the potential to grow in the market. In general, top spinning candlestick patterns can be reversal or continuation patterns.

Spinning top (candlestick pattern)

The candlestick pattern represents indecision about the future direction of the asset. It means that neither buyers nor sellers could gain the upper hand. The spinning top forex pattern on the right, however, formed after a clear downtrend, which led to a bullish reversal soon afterwards. More significance is therefore placed on spinning tops that form during a strong bullish or bearish trend.

• Now, another great way to see whether a spinning top is worth taking or not, is by using some sort of filter that measures overbought and oversold conditions.
• Experts emphasize that the Spinning Top pattern just shows the state of confusion among traders about the direction of the market.
• The upper shadow connects the highest price of the day with the real body.
• It’s only when the body forms right at the end that it’s not classed as a spinning top… we call these pin bars.

A spinning top candlestick is a sign of indecision in the market. However, this does not come as a surprise because it is a doji candlestick. It has a thicker real body and also can be found in consolidation areas. Look for price break above or below candle to confirm direction. To use the spinning top candlestick trading strategy, you first need to identify the current market trend, which could either be bullish or bearish. If a spinning top candlestick is formed at the peak of a bullish trend, this is a good sign that bears may gain momentum, which also means it can likely be a sell signal.

Spinning tops within trends may be reversals signals, but the candle that follows needs to confirm. We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training.

After the appearance of the bullish engulfing pattern, the risk has reduced. Spinning Tops are therefore a sign of a market with dominant ambiguity and indecision. Because neither the bulls nor the bears were able to affect the markets, it simply indicates hesitation. A price reversal is more likely, especially if the following candle confirms the prediction–most of the time, this is the case after a price increase or decline.

Hammer is a bullish pattern , while spinning top has no bullish or bearish bias. The main difference between a Doji and Spinning Top is that the real body in case of Spinning Top is small but non-zero and in case https://g-markets.net/ of Doji it is almost zero. A spinning top with high volume generally indicates that consolidation phase is going to continue and one should stay out of trading or stay with existing trade if already in one.