Western technical analysts adopted it later as a classic reversal signal. The origins of candlestick charting trace back to 18th-century Japan, where rice trader Munehisa Homma first used them to track price movements. Over time, these patterns became integral to global technical analysis. The best way to build confidence in candlestick patterns is to backtest them on historical data.
Relying on a Spinning Top as the sole signal to enter a trade is highly risky. Traders should watch out for false breakouts and sudden reversals, which can occur due to the low volatility often present during the pattern’s formation. Let’s explore an example of a Spinning Top candlestick pattern on the hourly chart of the Nvidia Corp. stock.
What Is A Bearish Spinning Top Pattern?
Partial exits can be particularly useful with the spinning top, since this pattern often marks indecision. It gives you flexibility in case the market follows through for a short time and then reverses again. Traders can set alerts for the periods towards the end of the spinning top or confirmation candle appearing (depending on the time frame) to avoid staring at the charts.
What Are Similar Patterns To The Spinning Top Pattern?
To be more precise, the position of the spinning top in relation to other candles – what comes before a spinning top and after it. To read spinning top candles, it is important to analyze the wicks and the body. A long upper wick indicates selling pressure, while a long lower wick indicates buying pressure. It is important to look at the context in which the spinning top candle occurs to determine its significance.
- A spinning top candle is formed when the opening and closing prices are close to each other, resulting in the characteristic small real body of the candle in this pattern.
- A Spinning Top often indicates that the prevailing trend is losing momentum and the market is pausing to determine its further direction.
- Spinning tops can be handy little clues but I have noticed that many traders often misread their signals.
- Wait to see what price does on the next few candles to find out who won the battle.
- It indicates market indecision, suggesting a balance between buyers and sellers without a clear dominant force.
#3 They Don’t Indicate A Reversal Simply A Pause
- In volatile markets like crypto, this behavior becomes even more visible.
- Using spinning tops in your trading strategy requires patience and a wide view of the market.
- For traders, a Spinning Top provides a valuable insight into market psychology, as it hints that the prevailing sentiment may be weakening.
- The importance of controlling your emotions and having a proper mindset when trading.
- It means the price fell hard, but buyers pushed the candle’s body back up.
Bullish patterns work best when they appear after extended downtrends, near key support levels, and ideally with rising volume that confirms renewed buying interest. When it’s time to enter, set your entry carefully and always include a stop-loss to protect yourself from false signals or unexpected market moves. Take the pattern at face value but look for support from volume spikes or RSI divergences and other technical signals that add strength. Take a step back and consider the overall trend or market situation leading up to that moment so you can better understand what the pattern might be hinting at.
It reflects market indecision, where neither buyers nor sellers hold a clear advantage, and is often used in technical analysis to assess potential trend reversals or consolidations. The spinning top candlestick reflects market indecision and suggests a potential reversal or consolidation. Traders use this pattern as a tool to identify areas of uncertainty in the market. Therefore, it’s important to consider the spinning top pattern within the broader context and get confirmation from other analysis tools. To become a successful trader, understanding candlesticks is a great place to start.
Regret Theory: Understand How it Affects Your Trading Decisions
Traders consider it highly reliable because it reflects steady market confidence. Its structure shows that corrections are shallow and that buyers maintain strong control. TradingWolf’s studies report a 75% success rate for trend continuation with Rising Three. LiberatedStockTrader also ranks it above average for reliability in trending markets. Traders see the Rising Three as confirmation that a trend is healthy and resilient. The weak mid-session pullbacks reassure that bears are unable to alter the bigger picture.
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 indecision of the spinning top candlestick is a sign of an upcoming trend reversal. These are examples of both bullish candlesticks and bearish spinning tops. Blue ones represent the bullish candlesticks, and the bearish ones are represented by orange ones. Spinning top candlesticks are typically small candlesticks with a larger real body found on stock charts near both support and resistance levels, signaling indecision.
Look for a price break above or below the candle to confirm direction. Being a one-candlestick pattern, the spinning top candlestick is generally viewed as less reliable than two- and three-candlestick price patterns. This is because the spinning top appears more frequently on the chart during spinning top candlestick pattern both trending and non-trending market environments. Hence, it is usually analyzed alongside the next candle to either confirm a trend reversal or a trend continuation.
This means buyers had a tiny win, even if it ultimately wasn’t convincing. If this happens after a downtrend, it can hint that the selling pressure might be easing. It’s not a signal to buy now, but rather to watch what happens.
A spinning top trading strategy focuses on reading market hesitation and pairing it with structure. On its own, the pattern is neutral, so traders use it as a signal to slow down, reassess momentum, and wait for confirmation before acting. When a spinning top forms after a series of bullish candles, it can signal that buyers are losing strength. The long upper and lower shadows suggest that bulls tried to push the price higher, but bears managed to push it back down before the end of the day.
The wicks or shadows of the candle are long – indicating the lowest and highest trading prices of the timeframe being considered. These significant departures in the high and low indicate a lot of volatility, a lot of action – but no clear winner. The spinning top candle pattern needs to be combined with other methods of analysis, of course – but it is incredibly versatile. Trend reversals can easily be taken advantage of with both long-term and short-term approaches, and even with both single-leg and multi-leg strategies.
There is another bearish spinning top candlestick pattern on the right. A spinning top candlestick is a neutral candlestick pattern that reflects market indecision. It forms when the open and close prices are very close, creating a small real body, while both the upper and lower wicks stretch noticeably in each direction.
It has a small body near the top and a long lower wick, showing that sellers pushed price down but were overpowered by buyers before the close. Every pattern represents the emotional state of traders — fear, greed, indecision, or conviction. When similar emotions repeat under similar circumstances, the same price structures tend to form. Trading stocks by looking at spinning tops helps decide when an investor should buy or sell.
Born in 18th-century Japan from rice trading records, candlestick analysis has stood the test of time. Despite modern trading algorithms and lightning-fast markets, these simple shapes still capture something algorithms can’t — emotion. In this guide, we’ll unpack how to read them, what each pattern reveals, and how you can use them to improve your timing and confidence as a trader. Discover how to recognize the evening star candlestick pattern—a powerful signal highlighting potent… This pattern indicates a period of indecision and balance between buying and selling pressure.