Let us look at this Tata Elxsi price chart to understand this candlestick pattern better. At its core, the spinning top is not bullish, bearish, trend-following, or a reversal signal. Traders typically either wait for further developments or look for additional signals to make their decisions. The spinning top is typically interpreted as a neutral signal, indicating indecision or uncertainty in the market. This pattern indicates a period of indecision and balance between buying and selling pressure.

Of course, there are other types of candlesticks that you should learn about. And even so, candlestick analysis alone is not enough to trade successfully. In fact, you’re free to forget all of the names as long as you can look at a candlestick and understand what it means. In order to form a complete trading strategy, you need to understand the basic math of trading, order types, and trading psychology.

What Is An Example Of The Spinning Top Pattern?

Moreover, Fib levels are stronger when they coincide with structural price (support and resistance) levels. Similar to example #1, we can see a clear uptrend leading to the spinning top candle. However, the spinning top candle was followed by a bullish candle that served as a continuation pattern—signifying that the bullish market sentiment remained intact. In a downtrend, it indicates a buying pressure, followed by a selling pressure that was not strong enough to drive the market price down. The inverse hammer suggests that buyers will soon have control of the market. Use demo accounts, replay historical charts, and focus on context and confirmation before trading with real capital.

Where Does The Name Of The Pattern Spinning Top Come From?

What makes this pattern stand out is not just the small real body but the story it tells about the balance of power between buyers and sellers during a trading session. 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.

• This period is usually referred to as ‘pause days’ and is characterized by relatively shorter candles after a parabolic move and before the asset moves once again with high momentum.
• Plus, you need to be able to recognize cycles, trends, and price levels.
• This is because the spinning top appears more frequently on the chart during both trending and non-trending market environments.

The first variation above shows a bearish-colored spinning top followed by a bullish-colored spinning top candle. UseThinkScript is the #1 community of stock market investors using indicators and other tools to power their trading strategies. Traders of all skill levels use our forums to learn about scripting and indicators, help each other, and discover new ways to gain an edge in the markets. They are commonly formed by the opening, high, low, and closing prices of a financial instrument. They provide a strong foundation but work best with risk management, confirmation tools, and trend analysis.

• 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.
• If the closing price is above the opening price, then normally a green or hollow candlestick (white with black outline) is shown.
• In this case, a Spinning Top can indicate that the price is resting as it closes near where it opens (despite the wild price swings within the day that are reflected in the long wicks).
• As you can see in the picture, although they look similar at first glance, there are some key differences.
• It means the price fell hard, but buyers pushed the candle’s body back up.

Pin Bar Reversal Indicator for ThinkorSwim

Obviously, no single candlestick can determine an entire trend. Still, doji that appear at the right time can have significant implications on future price action. The candle doesn’t reveal who won the battle, only that it took place! You have to wait for the next candle to show a pin bar or engulf to know who’s now in control of price.

Meaning of Spinning Top Candle for Traders

Even when confirmed, the resulting price movement may not always be large enough to justify a trade. The spinning top candlestick pattern also does not provide a clear profit target or stop-loss level, so traders need to combine it with other tools for risk management. This means neither buyers nor sellers had a decisive advantage. Both tried to push the market in their favour, but by the end of the session, neither side truly won. Well, when a Spinning Top candlestick forms when the price is trying to breakout/breakdown, it tells us that there is still indecision and the break in price lacks conviction. The appearance of Spinning Top candlesticks tells us that volatility is low and the price is digesting its previous trending move.

On a 5-minute chart, for example, a Spinning Top could indicate a moment of hesitation in a fast-moving market. On a daily or weekly chart, it could signal that a potential shift in a longer-term trend is coming. By looking at the history of the chart, you can identify how price action played out around prior spinning top candles (or patterns that included them). Moreover, you can compare historical structures in price and your other tools to current price action.

Utilizing the Spinning Top Candlestick Pattern

The spinning top and the doji candlestick are both candlestick patterns that signal market indecision, but they differ slightly in structure and meaning. The spinning top candlestick is a simple but important pattern that signals indecision in the market. What makes the spinning top especially valuable in technical analysis is its ability to signal a potential shift in market sentiment. While the pattern can appear in any market condition, its significance is much greater when it shows up after a sustained trend — whether bullish or bearish. In the context of an uptrend, a spinning top suggests that the buyers who have been in control are starting to face resistance from sellers, hinting at possible exhaustion in the upward momentum.

They are visual formations created by price movements within a set period, reflecting the psychology of buyers and sellers. A hammer on a one-minute chart doesn’t carry the same weight as one on the daily chart. It forms when price opens and closes at nearly the same level, leaving only thin wicks above and below. Finally, the Dark Cloud Cover pattern warns of an incoming storm. It begins with a green candle and follows with a red candle that opens higher but closes below the midpoint of the first — a sudden flip in sentiment.

It’s not a signal to buy now, but rather to watch what happens. The spinning top candlestick is but one of many candlestick types. Spinning tops indicate that momentum swung wildly but neither side was able to maintain control over the time period that candle represents.

This is why analyzing this pattern together with the volume indicator is vital to pinpoint valid spinning tops to watch out for. 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.

This approach allows for tighter risk control by defining clear boundaries for acceptable loss or desired profit. For instance, when trading a potential reversal, a stop-loss can be set just above the high of a bearish spinning top or just below the low of a bullish spinning top, helping to limit downside risk. This pattern visually represents market indecision and uncertainty. The long wicks show that there was plenty of activity and effort on both sides, but the lack of follow-through means neither side was able to impose a lasting impact on the session’s outcome.