This means that the bulls are losing control, and bears may take the reins. At Morpher, we offer zero-fee trading and advanced charting features that allow you to analyze candlestick patterns with ease. In addition, you can also use the RSI as a “divergence” tool to identify possible mismatches with price action. For example, suppose the spinning top is followed by a bearish candle, serving as a potential trend reversal for the ongoing uptrend and subsequently leading you to take a short position.

A spinning top candlestick pattern is a type of candlestick that indicates indecision in the market. It is characterized by a small real body, where the opening and closing prices are close to each other, and long upper and lower shadows. Characterized by a small body and long upper and lower shadows, the spinning top signifies market indecision. The small body indicates that the opening and closing prices were close, while the long shadows suggest significant volatility and a struggle between buyers and sellers. Recognizing the spinning top pattern can alert traders to potential changes in market direction, making it an essential component of a well-rounded trading strategy. In the world of technical analysis, candlestick patterns have long been relied upon by traders to uncover potential market trends and reversals.

The bullish spinning top has a Doji-like smaller real body which indicates that the opening and the closing price of the stock are more or less similar. Bullish spinning top has longer wicks suggesting that the highest and lowest price of the day has a significant difference between them. Sometimes, the spinning top appears after a downtrend, forming a part of reversal patterns such as the morning star.

1. Due to this indecision and uncertainty, it is hard to know where the market will head next.
2. This integration of patterns and price levels enhances the predictive reliability.
3. In comparison to other candlestick patterns, spinning tops are less definitive.
4. Another scenario that occurs is a bearish candle forming nearing the resistance level of security.
5. The bullish spinning top has a Doji-like smaller real body which indicates that the opening and the closing price of the stock are more or less similar.

Traders should use both patterns in conjunction with other indicators to make informed trading decisions. The indication of a bullish spinning top is that the stock could be bottoming out and the price start to rise soon. The bullish spinning top usually appears after a long run of a bearish trend. The pattern is a sign of indecision in the market, and the bulls and bears are evenly matched. But the bulls start to take control soon, leading to a bullish trend in the market. A bullish spinning top is a candlestick pattern that occurs when the closing price is higher than the opening price.

Scenario #1: During an Uptrend – Followed by a Confirmation Candle

In this case, it hints at weakening buying pressure, and the subsequent bearish candle can confirm the trend reversal. The bearish spinning top pattern warns traders of potential selling pressure. Investors should look for further bearish patterns or confirmation before making significant decisions.

Candlestick patterns are some of the toolsinvolved in technical analysis. Candlestick patterns used in technical analysishelp us interpret price movements and make more informed buying and sellingdecisions. Today, we will look at one of them, the «Spinning Top»candlestick pattern.

The trend is termed as an Uptrend when the prices are making higher highs and higher lows. As the spinning top candlestick pattern psychological and fundamental factors improve, the prices start moving up and form an upward trend. The horizontal price movement happens when the supply and demand are almost equal.

By doing so, you may limit potential losses if the trade moves against your expectations. The Super trend indicator is very effective in trending markets and is easily identified. An example of a bearish spinning top pattern in the stock market is given below. AltFINS crypto screener allows traders to create custom filters based on Candlestick patterns. These patterns include 1-Candle Patterns, 2-Candle Patterns, and patterns involving 3 or more candles. Here is another chart where the doji appears after a healthy uptrend after which the market reverses its direction and corrects.

1. Traders should look for a candlestick with a small real body and a long upper shadow to identify a bullish spinning top pattern.
2. Each session opens at a similar price to the previous day, but the selling pressure pushes the price lower and lower with each close movement.
3. In short, these candles show both price movement but also incorporate volume which determines the width of the candle.
4. If this pattern is observed near astrong resistance level or below a specific moving average, it can be areliable signal to take a short position.
5. Hundreds of markets all in one place – Apple, Bitcoin, Gold, Watches, NFTs, Sneakers and so much more.
6. In the above example, you can see how the candlestick was narrow relative to the volume candle that preceded the gap down.

Children’s spinning tops are the inspiration for the naming of the Spinning Top candlestick pattern. The difference between a bullish spinning top and a bearish spinning top is the direction of the trend they indicate. As for forecasting reversals, the commonality of spinning tops also makes this problematic. Confirmation is required, but even with confirmation, there is no assurance the price will continue in the new direction. A candlestick should have long upper and lower shadows to qualify as a spinning top. These shadows represent the trading period’s highs and lows and indicate significant volatility within the session.

Sensitive to Market Context

The bulls have also attempted to arrest the price fall and have tried to hold on to their position, though not successfully. After all, if they were successful, the day would have resulted in a good blue candle and not really a spinning top. A spinning top occurring at the peak of an uptrend can signify that the bullish is losing track and the trend is about to reverse. However, when a spinning top is at the base of a downtrend, it is a sign that the bearish is losing control, and the bullish may take control. It means that a spinning top may alert about an upcoming crucial change in a trend. However, a confirmation from the next candle is key to determine whether the prices will drop after the uptrend.

Pairing with Other Indicators

Both patterns are important in identifying potential market reversals or periods of consolidation. 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 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. Moreover, no candlestick formation guarantees a trend reversal, not even a common candlestick pattern.

The prices will mostly remain around the same range, and the trader can wait it out if a bearish candlestick is formed near the support price of a security. Another scenario that occurs is a bearish candle forming nearing the resistance level of security. The traders can take a short position in this scenario and sell the stocks at a higher price before buying them at a lower price after the price has fallen. The first candle is a bullish candle, which indicates the continuation of the uptrend. The second candle is a bearish candle, which opens the gap up but closes more than 50% of the real body of the previous candle. This shows that the bears are back in the market, and a bearish reversal is going to take place.

This signifies a peak or slowdown of price movement and is a sign of an impending market downturn. The trend is likely to be more significant depending on how low the second candle can go. Price movements within the spinning top candlestick indicate that buyers and sellers are overriding each other, resulting in homogenous open and close price trends. Using the spinning top pattern in a trading strategy will help the trader work within the minimum suggested investment time.