Spinning top

 

Spinning top

Two type of Spinning top

• Bulish spinning top
• Bearish spinning top

Spinning top

A short body in the centre and two long wicks on either side of it make up a spinning top candle. These two wicks should ideally have comparable lengths and a negligible opening-to-closing price change.

How does a spinning top candle work ?

A trading strategy using a Spinning Top candle is dependent on the risk tolerance of the trader, just like any other candlestick pattern. Furthermore, whether they offer short-term or long-term work is also significant.

For instance, the picture below demonstrates how the appearance of the Spinning Top candle caused the downtrend to reverse. It did not, however, occur immediately. Many traders would have seen the first candle following the Spinning Top as a signal for the continuation of the trend because it was extremely bearish.

Spinning top

Although there was a lot of volatility along the way, the price eventually moved upward, giving risk-tolerant bears an opportunity to profit from the short-term downward swing. Because of this, a spinning top is regarded as a recommendation rather than a powerful entry indication.

Risk-averse traders typically wait for three higher highs and lower lows for an uptrend and three lower highs and lower lows for a downtrend before opening a position. Since the second candle following the Spinning Top had a lower low than the first, signalling market volatility and indecision, you can see that there was also no strong confirmation of an uptrend.

In these situations, traders can choose a trading opportunity by incorporating information from other technical analysis tools.

The picture below, for instance, shows how to utilise trendlines in conjunction with a spinning top candle to identify a price breakout. Furthermore, this candle signalled a trend reversal because it was preceded by a strong advance.

Spinning top

Technical indicators can also be useful for elucidating market signals if you are familiar with them. To avoid larger than anticipated losses, it is crucial to always use risk management tools, as no technical tool can provide 100% accurate trade signals.

Planning a trading strategy is another area where using a demo account is beneficial. Make one for free, then practise opening trades and identifying candlestick patterns in a risk-free trading environment. To learn more about patterns,