Everything you wanted to know about spinning top candlesticks

It is identified as a bearish trend when there is a fall in the prices of about 20%. The prices are making lower lows and lower highs, and then the trend is termed the Downtrend. The prices start moving down and form a downtrend when the psychological and fundamental factors degrade.

It consists of a long lower shadow and a small real body near the candlestick’s top that resembles a hammer. This pattern indicates that after a period of selling pressure, buyers are entering the market and pushing prices higher. Traders who spot a hammer pattern often interpret it as a signal to go long, implying that a possible reversal is in the works. The Bearish Spinning Top candlestick pattern emerges at theend of an uptrend, indicating the approach of the bullish trend’s end. 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. If the following candlestick closesdownward, there is a greater possibility of the downtrend continuing.

1. The Relative Strength Index (RSI) is a technical analysis tool that traders use to assess the strength of an asset’s price movement.
2. 12 and 26 exponential moving averages are the most commonly used parameters for the EMA.
3. Confirmation from other technical tools is necessary while forecasting future action plans, as this is quite a common pattern and may not mean something consequential.
4. In the other direction, a bearish spinning top pattern occurs at the top of a trend and may signal a price reversal and a new trend direction.
5. The bullish patterns are best used with a technical indicator like RSI, MACD, Bollinger bands, etc.
6. Here is another chart where the doji appears after a healthy uptrend after which the market reverses its direction and corrects.

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Here, it serves as an early signal that bears may be losing momentum, potentially followed by a bullish candle that confirms the upward trend. The spinning top candlestick is versatile and can appear in bullish and bearish patterns. While it doesn’t necessarily indicate a trend reversal by itself, it’s often found within patterns that do. Conversely, a bearish spinning top candlestick appears when sellers dominate during the session but fail to spinning top candlestick pattern maintain their lower price levels.

1. These patterns include 1-Candle Patterns, 2-Candle Patterns, and patterns involving 3 or more candles.
2. This light volume eating into a gap with a fat volume candle above increased the likelihood of the stock rolling over and that’s exactly what happened.
3. Moreover, Fib levels are stronger when they coincide with structural price (support and resistance) levels.
4. Observing subsequent candles for a decisive move in either direction can help validate the initial signal provided by the Spinning Top.
5. This downtrend phase can also continue, and it can produce false signals.

Spinning top candlestick patterns offer several benefits in trading decisions. They serve as early indicators of market indecision and potential trend reversals, providing traders with an opportunity to reassess their positions. The small body and long shadows of a spinning top reveal a balance between buyers and sellers, signaling that the prevailing trend may be losing momentum. This information helps traders anticipate changes and make more informed decisions about entering or exiting trades. The pattern is more reliable when it appears after a prolonged downtrend and is confirmed by other technical indicators such as trend lines, moving averages, and oscillators.

Scenario #5: Choppy Market or Consolidation Period

It means you may be dealing with a higher risk in comparison to the expected reward. A spinning top with long shadows can create a large high-to-low range, making it difficult to set stop-loss orders without taking on considerable risk. In such cases, traders must carefully assess the risk-to-reward ratio and consider using other candlestick patterns or indicators to guide their decision-making. However, unlike the doji candlestick pattern, the hammer pattern is mainly used as a bullish reversal pattern during downtrends. When market interest is low, the asset can be easily pushed between two price extremes on that specific day. This is why analyzing this pattern together with the volume indicator is vital to pinpoint valid spinning tops to watch out for.

With its short body and long wicks, these candlesticks serve as invaluable tools in technical analysis. It suggests a moment of indecision in price action that might lead to a trend or price reversal. Understanding candlestick patterns is vital for forex traders as they help in predicting future price movements and making informed trading decisions. By interpreting these patterns, traders can identify potential trend reversals, continuations, and indecisions in the market. This knowledge enhances the trader’s ability to enter and exit trades at optimal times, thereby improving their chances of profitability.

Traders use the Piercing Pattern as a signal to enter a long position or to exit a short position. However, as with all candlestick patterns, it is important to confirm the pattern with other technical analysis tools and to use appropriate risk management strategies. One potential drawback of the Piercing Pattern is that it may also indicate an overbought market condition, where the price has risen too far too fast and is due for a correction. Traders should be cautious and use appropriate risk management strategies to avoid potential losses. Recognizing spinning top candlestick patterns is essential for traders in identifying potential turning points in the market. The candlestick movement can indicate trader indecision between bull and bear market conditions.

However, their appearances are almost the complete opposite of each other. While the spinning top candlestick pattern has a short body and long wicks, the marubozu has a long body with little to no wicks. In contrast, a doji candlestick pattern usually has no real body and relatively much shorter wicks.

#2 – Volume Candle

It’s crucial to consider additional technical indicators, market trends, and risk management principles when executing trades. The TickTrader trading platform allows traders to learn how to spot patterns on charts of different assets to trade them right away. The bullish spinning top is represented as green, and the bearish spinning top is represented as red.

Strike offers a free trial along with a subscription to help traders and investors make better decisions in the stock market. The bullish spinning top suggested the end of a bearish trend reversing to a bullish trend here. The bullish spinning top indicates a possible reversal of the bearish trend and the beginning of a bullish trend. Trading around a spinning top can also pose some problems since the candle can be quite large, from high to low. Investing in securities is speculative and carries a high degree of risk; you may lose some, all, or possibly more than your original investment.

A bearish EMA crossover is signaled when the defined short-term exponential moving average crosses the long-term exponential moving average. An exponential moving average is combined with various other indicators like MACD, RSI, trend, etc, to confirm the trend before taking any position. 12 and 26 exponential moving averages are the most commonly used parameters for the EMA. A bearish crossover, which is also known as the death cross, is signalized when the defined short-term moving average crosses the long-term moving average from above.