Spinning Top Candlestick Pattern Overview, Formation, How To Trade

We will look to short a failed breakout at an important swing high or resistance level, within the context of an overall downtrend. Entry was triggered when the price had a breakdown and closed below the flag. It went into a consolidation forming several Spinning Top candlesticks within the flag. In this strategy, we will incorporate the Spinning Top candlestick, into the classical flag pattern. This is why it is not a good idea to use the Spinning Top candlestick as a trading signal on its own.

Strategy Example 1: Going Long on a Spinning Top With Confirmation

I’ll be the first to admit that spinning tops aren’t the most useful of candlesticks. So keep this in mind going forward, when you see spinning tops form at significant technical levels. So we didn’t know (for sure) if buyers were still interested or whether the zone would cause a reversal. The top reconfirms that, telling us YES, buyers are still around, keep your eyes open because an entry signal could soon appear. But they also indicate one side of the market (bulls or bears) believe the current price is too high or too low. Here, the price attempted to breakout above the previous swing high, but failed and reversed intraday, which served as an entry trigger.

Is a Spinning Top Candlestick Bullish or Bearish?

By concentrating on the tops that form in and around technical levels – supply and demand zones, support and resistance levels, fibs, etc.. The best way to use tops is as an early warning signal the current move could be coming to an end, and price may soon reverse or retrace slightly. You won’t have much trouble identifying the spinning top – it’s one of the most common candlesticks, so you’ll see it pretty much everywhere. The presence of a Spinning Top candlestick just before this failed breakout told you that there was indecision going into the breakout. A bullish bar adds confluence to this false break and serves as our entry trigger.

What does a spinning top tell traders?

A candlestick is a way of displaying information about an asset’s price movement. Candlestick charts are one of the most popular components of technical analysis, enabling traders to interpret price information quickly and from just a few price bars. Candlestick patterns are used to predict the future direction of price movement. Discover 16 of the most common candlestick patterns and how you can use them to identify trading opportunities. The most common method used by technical traders to confirm a trend reversal is waiting for the formation of the succeeding candle. Using the example above, the succeeding candle should close lower than the wick of the Spinning Top.

For example, in the figure below taken from an FX chart, the bearish engulfing line’s body does not exactly engulf the previous day’s body, but the upper wick does. With a little imagination, you’ll be able to spot certain patterns, although they might not be textbook in their formation. Because the FX market operates on a 24-hour basis, the daily close from one day is usually the open of the next day.

This comes after a move higher, suggesting that the next move will be lower. The pattern includes a gap in the direction of the current trend, leaving a candle with a small body (spinning top/or doji) all alone at the top or bottom, just like an island. In the EUR/NZD chart above, the Spinning Top candle (bearish) appears at the top of an uptrend – highlighted by the gold trend line. The indecision from buyers and sellers is apparent and leads to a reversal in trend direction.

We know a spinning top at a technical point reveals sellers (or buyers in our case) think the price is too low/high – a good indication price is probably going to reverse. We can then use it to #1 know price still has a chance of reversing from the zone, and #2 as a timing mechanism on when to expect a PA signal to appear. As always, we must wait for price action signals – like pin bars, engulfs, etc – to confirm price is about to move away.

A spinning top is very similar to a doji, but with a very small body, in which the open and close are nearly identical. Not compared to pin bars and engulfing candles, which give us a clear idea of what price will next. Even so, they can provide you with some really useful insights, which I hope you’ve gleaned from today’s post. So again, DO NOT use spinning tops as reversal signals, they don’t work. You have to wait for the next candle to show a pin bar or engulf to know who’s now in control of price.

1. One of our favorite indicators to define overbought and oversold conditions is the RSI indicator.
2. A daily candlestick represents a market’s opening, high, low, and closing (OHLC) prices.
3. 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.
4. The example below goes through identification, confirmation and execution of a practical forex trade using the Spinning Top.

The lower the second candle goes, the more significant the trend is likely to be. You can practise trading using the spinning top chart pattern with an IG demo account. You’ll be able to open and close positions in a risk-free environment with £10,000 in virtual funds. Trading with the Spinning Top candle involves understanding how it is formed and where it sits in relation to the overall market trend. The example below goes through identification, confirmation and execution of a practical forex trade using the Spinning Top. The volatility of the market could have a great impact on price patterns and their accuracy.

We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform. Therefore, any accounts spinning top candlestick pattern claiming to represent IG International on Line are unauthorized and should be considered as fake. 70% of retail client accounts lose money when trading CFDs, with this investment provider.

The spinning top candlestick is an easy formation to recognise and can be helpful in determining whether a price reversal might occur. Learn more about this pattern and how you can trade when you recognise it. Daily candlesticks are the most effective way to view a candlestick chart, as they capture a full day of market info and price action.

But what happens between the open and the close, and the battle between buyers and sellers, is what makes candlesticks so attractive as a charting tool. A candle you’ll find all over your charts, the Spinning Top is one of the most common candlesticks in forex. It forms from the bulls and bears battling for price supremacy but coming to a stalemate, and typically signals indecision in the market – which isn’t always true, as you’ll see later.

A spinning top is a one-candle reversal pattern signaling market uncertainty. It has a small body closing in the middle of the candle’s range, with long wicks on both sides. In this article, we’re going to take a closer look at the spinning top candlestick pattern.

Please ensure you fully understand the risks and take care to manage your exposure. Discover the range of markets and learn how they work – with IG Academy’s online course. Ever glanced at a chart and spotted a curious candle with a long, thin line… Always remember, while Spinning Tops can provide valuable insight, they should be used in combination with other factors for more accurate predictions.