The spinning top candlestick chart pattern happens when buyers and sellers balance out, resulting in equal opening and closing price levels. This candlestick is regarded as a continuation pattern because of the very modest shift in market direction.
This chart pattern comes in two flavors: bullish spinning top (green) and bearish spinning top (red). When the closing price is higher than the opening price, the formation is bullish, but when the initial price is higher than the closing price, the formation is bearish.
Spinning Top Bullish and Bearish
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A bullish spinning top forms when the price starts significantly higher than the open price, and then sellers re-enter and force it down at the end of the day or candle period.
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A bearish spinning top pattern, on the other hand, occurs when the price opens dramatically lower and then buyers return. In both cases, the price is frequently close to or below the opening price.
The spinning top, like other candlestick styles, has a wick and a body:
- The vertical line forms the wick, while the horizontal lines make the body.
- Because the top symbolizes the highest price and the bottom represents the lowest price, the length of the wick might vary.
- The height of the body can also fluctuate since it shows the difference between the starting and closing price.
How to Buy and Sell the Spinning Top Candle
Understanding how the Spinning Top candle is generated and where it stands in respect to the general market trend is required when trading with it.
The Spinning Peak candle (bearish) appears near the top of an uptrend in the EUR/NZD chart above, which is underlined by the gold trend line. Buyers’ and sellers’ uncertainty is palpable, resulting in a reversal in trend direction.
Live traders should not enter a trade right after the Spinning Top forms, but should instead wait for confirmation. Technical indicators, fundamental elements, or oscillators, such as stochastic oscillators, might provide confirmation. As demonstrated by the blue circle, the stochastic re-confirms a short entry.
The most popular strategy employed by technical traders to confirm a trend reversal is to wait for the next candle to form. In the above example, the subsequent candle should shut lower than the wick of the Spinning Top. Without this verification, the indication of a bullish divergence may not have been confirmed, and economic uncertainty endures.
Understanding Top Spinning Candlesticks
A spinning top at the pinnacle of an uptrend might indicate that the bulls are losing ground and the trend is going to reverse. Whenever a spinning top appears just at bottom of a downturn, it signals that perhaps the bearish is trying to regain control and also that the bullish could take over. This means that a spinning top may signal an impending critical shift in a trend. However, confirmation from the next candle is critical in determining if prices would fall after the upswing.Committed traders must not trade quickly after a spinning top develops but instead stand in line for confirmation by technical indicators just after following candlestick forms. It will assist to minimize market doubts because the signal trend reversal will have been established.
When in an upswing, for instance, if a bullish happens just after spinning top just at the bottom, the trader might consider it as an entry signal. In an uptrend, a bearish pattern at the top of the spinning top pattern might well be utilized as just an exit point.
How Does a Spinning Top Candlestick Get Its Shape?
Whenever the bullish drive prices are higher than the starting price, the bears roll it back downwards before the market ends, a spinning top candlestick develops. Conversely, when negative traders drive prices lower than that of the open price then bullish traders drive prices even higher before the trade ends.
In all other terms, the market has studied both upward and downward alternatives until settling at roughly the same starting price, leading to no noticeable shift.
What Does a Spinning Top Tell to Traders?
Because there wasn't much of a difference between the starting and closing price, a spinning top indicates that there is uncertainty in the market. This might indicate that more neutral moves are on the way, or that a price reversal is imminent. If the spinning top is spotted near the bottom of a downtrend, it may indicate the possibility of a positive reversal. If it happens at the apex of an uptrend, it may indicate a negative reversal.However, traders should not act on any candlestick pattern without first conducting additional technical analysis. Always take into account other patterns and indicators, check the signal, and stick to your trading plan and risk management approach.
The Use of the Spinning Top Candlestick Pattern For Traders
Following the introduction of a brokerage account, the current user should be able to detect a spinning top candle with both a short body as well as long wicks across each side, as well as discover the market trend utilizing technical indicators and trend patterns.However, each trading approach comes with its own set of risks. As a result, the trader must enter the name of the item they wish to trade into the search field. After verifying the impending reversal, the trader may move to the trading ticket and pick either the buy or sell option.
When you notice the spinning top candlestick pattern, here’s how to trade it.
When you notice the spinning top candlestick pattern, you have a few options for trading. The first and most critical step is to validate the signal. Since technical indicators may provide greater insight into price patterns, many traders utilize them to corroborate what they assume a spinning top was signaling.
If investors believe a spinning top at the bottom of such a downtrend could suggest an impending reversal, anyone can use a stochastic oscillator and evaluate the indication. This indicator can help you forecast price fluctuations since it displays the market’s speed and momentum over a defined timeframe. If the impending reversal is verified, you might wish to invest (go long).
When you notice the spinning top candlestick pattern, you may trade it using derivatives like spread bets or CFDs. You don’t own the underlying assets when you use derivatives; instead, you bet on their price swings. This implies that you may trade rising and falling markets to profit from both bullish and bearish spinning tops.
Doji vs. Spinning Top
As a result, a spinning topper is sometimes mistaken with a Doji pattern. The only difference is that the Doji pattern opens and closes at the same spot. Another distinction is that the Doji is often seen as a sign of reversal. When this occurs, it provides a signal that the price will reverse.The spinning top, on the other hand, is frequently an indication of market uncertainty or hesitation. The concept of hesitation is likewise quite simple to describe. For one thing, the price began rapidly upward in a bullish spinning top, indicating that bulls are performing well. However, once this occurs, sellers re-enter the market and drive the price down to around the opening price.
Another distinction between the Doji and the spinning top is that the Doji usually appears at the peak or bottom of a trend. The spinning top, on the other hand, occurs near the top or middle of the chart.
Conclusion
Finally, the Spinning Top candle represents market hesitation between buyers and sellers, which may suggest price reversals. It is critical to recognize the Spinning Top's market posture whether inside a trend or at crucial price levels of support and resistance. At these points, the Spinning Top candlestick pattern is most useful.The spinning top candlestick chart pattern is formed when the price of an asset opens and closes at the same level; it is an indication of rest and consolidation. The spinning top pattern has two variations: a bullish spinning top and a bearish spinning top. When the market has explored both upward and downward alternatives but ultimately closes at roughly the same price as it opened, a spinning top candlestick appears.