Spinning top candlesticks are characterized by compact bodies and long upper and lower shadows, resembling a child's toy top. These formations occur when bulls and bears engage in a tug-of-war, with neither side gaining a significant advantage during a trading period.

Candlestick patterns form when the buyers push the price up during a given period, and the sellers push the price down at the sam💝eꦑ time, but ultimately, the closing price ends up very close to the open. For their part, spinning tops can signal a potential price reversal after a strong price advance or decline if the following candle confirms. A spinning top can have a close above or below the open, but the two prices are always close together.

What Does a Spinning Top Candlestick Tell You?

Spinning tops are a sign of indecision in the asset; the long upper and lower shadows indicate there wasn't a meaningful change in price between the open and close. The bulls sent the price sharply higher, and the bears sent the price lower, but in the end, the price closed near where it opened. This indecision can signal more sideways movemen🌠t, especially if the spinning top occurs w♐ithin an established range. It can also signal a possible price reversal if it occurs following a price advance or decline.

Sometimes, spinning tops may signal a significant trend change. A spinning top at the top of an uptrend could signify that bulls are losing control, and the trend may reverse. Similarly, a spinning top at the bottom of a 𒈔downtrend could signal that bears are losing control, and bul🅘ls may take the reins.

In any case, confirmation helps clarify what the spinning top is saying. The confirmation comes from the next candle. If traders believe that the spinning top after an uptrend could result in a reversal to the downside, the candle that follows the spinning top might be a bearish one with a lower close. If it doesn't, the reversal will not be confirmed, and the trader won't need to wait for another trade signal. If the spinning top occurs within a range, this indicates indecision is still prevalent, and the range will likely continue. The following candle would confirm it if it stays within the established sideways trend.

Spinning tops are a common candlestick pattern, and they work best with other forms of technical analysis. For example, traders may look at technical indicators, like the 澳洲幸运5官方开奖结果体彩网:moving average convergence-divergen🦩ce or relative strength indexꦛ, for signs of a reversal before taking a trade based on a spinning top. Indicators or other forms of analysis, such as those helping to identify support and resistanc🔴e, may help make better decisions based on candlestick patterns.

Example of a Spinning Top Candlestick

The chart above shows several spinning tops. On the left, the first one occurs after a small price decline. It's followed by a down candle, indicating a further price slide. The price heads a bit lower but then reverses to the upside. If taking trades based on candlesticks, this highlights the importance of having a plan and managing risk after the formation of the candlestick pattern.

The second spinning top occurs within a range. Since the price continues to head sideways, it confirms the market's present indecision.

The third spinning top is e💃xceptionally large compared with the candles around it. It occurred after an advance and was followed by a large down candle. This ended up being a reversal candle, given that the price proceeded lower.

As the price was dropping, another spinning top formed. It ended up being a brief pause as the next candle gapped lower, and the price continued falling.

These examples highlight the importance of confirmation and context. Spinning tops within ranges typically help confirm the range and the market's indecision. Spinning tops within trends may be reversal signals, but the following candle must confirm the breakout or 澳洲幸运5官方开奖结果体彩网:breakdown.

Limitations of Using the Spinning Top

Spinning top candlesticks are common, which means many patterns will be inconsequential. Since assets often have periods of indecision, this makes sense. Spinning tops frequently occur when the price is already moving sideways or is about to start.

As for forecasting reversals, the commonality of spinning tops also makes this problematic. Many spinning tops won't result in a reversal. Confirmation is required, but even with confirmation, there is no assurance the price will continue in the new direction.

Trading around a spinning top can also pose some problems since the candle can be quite large, from high to low. If confirmation comes after a spinning top and a trade is taken, placing a 澳洲幸运5官方开奖结果体彩网:stop loss above or below the high/low of the spinning top could result in a large risk which may not justify the potential rewar🌺d.

Assessing the reward potential of a spinning top trade is also difficult since the candlestick pattern do not provide a 澳洲幸运5官方开奖结果体彩网:price target or exi𝓡t plan. Traders should use other candlestick patterns, stra🥀tegies, or indicators to find a profitable exit.

The Bottom Line

The spinning top candlestick pattern represents indecision and uncertainty about an asset's future direction. It indicates that the bulls sent the price higher while the bears pushed it back down, resulting in no meaningful change in price. However, a spinning top can signify a future price reversal if confirmed by the following candle.

The spinning top is considered a common candlestick pattern, and trading with it is like trading other candlestick formations: traders should combine it with other candlestick patterns and indicators to find ♐profitable exits.