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The world of trading is littered with fake gurus and poisonous advice. As such, you need to test the strategies and patterns you want to use, before trading real money. The volatility of the market could have a great impact on price patterns and their accuracy. Sometimes a pattern will only work in a highly volatile market, while the opposite sometimes holds true as well.

• Trading the spinning top candlestick pattern involves waiting for confirmation of a potential trend reversal or consolidation period in the market.
• No communication from Rick Saddler, Doug Campbell, John Carignan, or this website should be considered as financial or trading advice.
• This ended up being a reversal candle, as the price proceeded lower.
• You can check out Investopedia’s list of the best online stock brokers to get an idea of the top choices in the industry.
• This information has been prepared by IG, a trading name of IG Australia Pty Ltd.
• And indeed, in the example above, this spinning top bearish pattern signals a trend reversal, and immediately after the next candle, a bearish trend begins.

Trading with the spinning top pattern can be done using derivatives like trading contracts for difference (CFDs). It means that the trader does not need to own the underlying assets but can speculate on their price pattern. Spinning top candlestick is a pattern with a short body between an upper and a lower long wick. The spinning top illustrates a scenario where neither the seller nor the buyer has gained.

Is the spinning top candlestick a reversal or continuation pattern?

Three-method formation patterns are used to predict the continuation of a current trend, be it bearish or bullish. In the USD/CHF chart below, we can see how the bullish spinning bottom pattern is formed at the end of a downward trend. As a confirmation, we used Fibonacci retracement levels drawn from the lowest level to the highest level of the previous trend. Since candlestick patterns are representations of market action, they give us interesting insights into what the market has been up to.

• If you leave the lower shadow and think about what happened in the market, it indicates that the bulls tried their best to push the market higher, however they were not successful.
• HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Room.
• Whether it be in an uptrend or a downtrend, it indicates a balance of bullish and bearish forces.
• A trader should look for a breakout candle and enter above the high of the spinning top on the buy side and place the stop loss at the low of the spinning top.

To identify the pattern, you first need to get familiar with the structure and characteristics of the spinning top formation. It has a really small body (the difference between the opening price and closing price), and very long upper and lower wicks (shadows). This information has been prepared spinning top candlestick pattern by IG, a trading name of IG Australia Pty Ltd. Next, four spinning tops formed, which was followed by another doji. These spinning tops and doji could not break a resistance line that created themselves. And because they were going lateral, they could be continuation or reversal patterns.

What Is a Candlestick Pattern?

A spinning top can have a close above or below the open, but the two prices are always close together. If the candle that follows confirms, spinning tops can indicate a potential price reversal after a significant price increase or decrease. It is a small candlestick pattern that can be both, a bearish or bullish pattern. This pattern is formed when opening and closing prices are almost similar or very close to each other.

During a rally or fall, it is a sign of a trend’s weakness, warning of a possible reversal. And, after the change of direction, it is a sign of indecision that predicts nothing. We research technical analysis patterns so you know exactly what works well for your favorite markets.

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No representation or warranty is given as to the accuracy or completeness of the above information. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. 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. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Room. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

Spinning tops are ants at a picnic, having the highest frequency rank of any candle. The candles are everywhere, and they don’t mean much when they do appear. The chart for https://g-markets.net/ Pacific DataVision, Inc. (PDVW) shows the Three White Soldiers pattern. Note how the reversal in downtrend is confirmed by the sharp increase in the trading volume.

Examples of Spinning Top Candlestick Patterns

It indicates a strong buying pressure, as the price is pushed up to or above the mid-price of the previous day. As a neutral candlestick pattern, the spinning top can be formed in charts in different scenarios. The implication of this candlestick pattern is a temporary uncertainty in the market and indecision from forex market participants about the next price movement of the specified currency pair.

A spinning top with low volume on the other hand may indicate that the market is about to make a big move and one should look for the break of the candle on either side. A spinning top with high volume generally indicates that consolidation phase is going to continue and one should stay out of trading or stay with existing trade if already in one. Let’s first take a look at the basics of candles so you can understand the various parts of a candlestick.

The single candle of the Spinning Top candlestick has long wicks that extend higher and lower its short body. Such a pattern is formed when the prices rapidly move in one direction before a sudden reversal of the trend in an inverse direction. This resulted in the closing price reverting back/very close to the opening price. There is usually a significant gap down between the first candlestick’s closing price, and the green candlestick’s opening.

The Inverted Hammer also forms in a downtrend and represents a likely trend reversal or support. The only difference being that the upper wick is long, while the lower wick is short. In this chart, we have the perfect combo to enter a short-selling position – that is, spinning top pattern, double top pattern, and the intersection at the 61.8% Fibonacci level.