Spinning Top Candlestick Pattern What Is And How To Trade

Ultimately, the spinning spinning top candle top lays the groundwork for a beginner to understand price action and eventually learn more complex formations. The first notable aspect is the spinning top aligning with an upper Bollinger Band extreme. The same extreme occurred at two prior points near a key resistance, which would have been another strong hint. Another technical clue was the rise in volume before the spinning top. Partial exits can be particularly useful with the spinning top, since this pattern often marks indecision.

Multi-Timeframe Analysis

• Since a spinning top can form both in an uptrend and downtrend, we’ll just exemplify with one that appears in a downtrend.
• While the immediate response saw a slight pullback, the overall uptrend continued, demonstrating that not all spinning tops lead to reversals.
• In this chart, the price had a move down forming the pole of the flag.

Notably, a Spinning Top pattern should not be used in isolation — it needs to be confirmed by subsequent candles, technical indicators, and fundamental factors. The correct application and interpretation of this pattern can significantly improve the efficiency of a trading strategy. A breakout of a key support or resistance level can serve as a confirmation and help make informed decisions regarding opening a long or short trade. Let’s say you spot a spinning top in a stock that’s been on an uptrend.

• In Native American cultures, tops were used for divination and spiritual rituals, and their revolving motion was believed to provide insights into the future.
• The pattern was confirmed by an RSI divergence and increased trading volume.
• While this indecision doesn’t guarantee a reversal, it often acts as a cautionary signal for traders who may be looking to enter or exit a position.
• A bullish spinning top is formed when the price opens substantially higher than the open price and then the sellers come back in and push it lower by the end of the day or candle period.

Real-Time Quotes Explained: Why Speed Matters in Trading

A neutral candlestick pattern, such as a spinning top, illustrate the current indecisive market sentiment. The asset is neither bullish nor bearish, and the price is at or near equilibrium. Hence, this pattern can signify a “decision point” on whether the trend continues or if a reversal appears.

We’ll also break down how accurate the pattern is, when it works best, and how traders build it into complete systems. The markets are often characterized as a battle between the bulls and the bears. Spinning tops give the impression of fierce back-and-forth price action. If the body is negligible or non-existent, it would technically be a long-legged doji.

It possesses a more pronounced body compared to the doji, albeit still small relative to its shadows. The appearance of a spinning top in a price suggests chart a market that is grappling with direction. There’s a clear tug-of-war happening between buyers and sellers, but neither side has managed to gain a significant upper hand. Additionally, the spinning top’s neutrality means it requires context.