Spinning top is one of the most frequently occurring single candle pattern in any technical chart for any time frame.
Following are some important points about spinning top candlestick pattern.
- It occurs very frequently in the market
- It indicates indecision in the market
- It has small but non-zero real body and long, approximately equal shadows on both sides
- Spinning top can be green or red in color
- Spinning top is generally not used for trading on its own
What is Spinning Top Candlestick Pattern?
Spinning top is single candle Japanese candlestick pattern which indicates indecision in the market. Spinning tops appear in the market very frequently in uptrend, downtrend and consolidation phase. Depending on where it appears it can be used for making trade decision.
What Does the Spinning Top Candlestick Look Like?
Spinning top candles are identified by their small real body with shadows longer than the body. The body of the candle is small but nonzero and the shadows are longer than the body. Generally, the shadows are symmetric in nature.
The small real body is the main configuration of the spinning top candle. The shadow length is what separates a spinning top from a short black candle. A short black candle may not have long shadows on either side.
The small but nonzero body height is what differentiates the spinner from a Doji candle. A Doji has almost zero real body.
What does Spinning Top candlestick pattern tell you?
A spinning top candlestick pattern generally means indecision. Since market is known for its indecision based behavior, this candlestick patter appears very often in the market.
The long wicks or shadows of spinning top mean that both bulls and bears tried to push the market in either direction but did not succeed. The small real body of spinning top means that price eventually closed very close to the open price and there was no clear winner on that day or timeframe.
Let’s take a closer look at all the aspects of a Spinning top
Small Real Body of Spinning top candle
This indicates that the open price and close price are very close to each other. For example, the open could be 1000 and the close could be 1010, or the open could be 1000 and close at 990. Both these cases lead to the creation of a small real body because a 10 point move on a 1000 value stock is not much.
Because the open and close price points are very near to one another, the color of the candle does not really matter. It could be a green or a red candle, what actually matters is the fact that the open prices and close prices are near to one another.
The upper shadow of spinning top candle
The upper shadow is the one connecting the high of the day to the real body of the candle. Depending on whether the candle is green or red the upper shadow will connect the open or close of the real body.
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. By the end of the timeframe the price actually came back to almost the same level where it started. If the bulls had succeeded, then it would have been a long green candle. So, this candle can be considered as an unsuccessful attempt by the bulls to take the market higher.
The lower shadow of spinning top
The lower shadow connects the low of the candle with the real body of the candle. Depending upon whether it is a green or red candle the lower shadow connects the close to the open or closing price of the day.
If you leave the top shadow and look at the bottom shadow, then it indicates that during the trading timeframe bears tried to push the price down, however the price rebounded and finally closed very near to the opening price of the day. So, this candle can be considered as an unsuccessful attempt of the bears to push the market down.
Now think of the spinning top candlestick pattern along with all its three parts, the small real body, the upper shadow and the lower shadow. The small real body indicates the market closed very near to open. Long upper shadow indicates the failure of bulls. Long lower shadow indicates failure of the bears. So, overall, it indicates that nobody actually won at the marketplace and that’s why spinning top candlestick pattern means indecision.
If you look at a spinning top in isolation it does not mean that much. It just conveys indecision as both bulls and bears were not able to win the markets. However, when you see the spinning top with respect to the prevalent trend in the market it gives out a really strong signal based on which you can position your trade in the markets.
Examples of How to Trade Spinning Top candlestick pattern
A small real body indicates indecision and fight between bulls and bears. It indicates that neither bulls or bears were able to establish the control and move the market significantly in their direction.
The psychology behind the pattern is what occurs on any given day. Price opens and the bulls and the bears begin fighting immediately, sending price higher and lower during the day, in case of bears ending slightly on top a red ( or black) candle is printed and in case of bulls winning slight advantage a green ( or white) candle is printed.
A spinning top candlestick after an extended uptrend or downtrend may indicate a start of reversal , however, needs confirmation from other reversal signals before one can enter the trade. A Red spinning top at the end of an extended uptrend and a green spinning top at the end of an extended downtrend has more chance of reversal happening.
Breakout above or below a Spinning top can indicate continuation of uptrend or downtrend.
Spinning top gets higher importance when it occurs at a pivot level , support or resistance and Fibonacci level.
Trading Spinning Top Candlestick in Uptrend
A spinning top appearing in strong uptrend indicates that the bulls are starting to lose control. It may not directly mean anything really as this happens quite often.
The fact that we were in strong bullish trend means the bulls were in complete control , a spinning top indicates indecision. This means the bears tried to make an entry, but it was unsuccessful, at least on that very day / timeframe.
Two things may happen from here , the spinning top might just be a small breather by bulls as they gather the steam again and push the markets higher. This happens more often that the other possibility which is bears actually taking control and pushing prices lower. For a spinning top to work as a reversal pattern , it generally will need some more confirmation signals such as multiple spinning tops , loss of momentum , lower volume etc. A spinning top will very rarely directly start a reversal.
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. Traders need some other confirmations , such as short term trendline break , trend continuation patterns etc.
Trading Spinning Top Candlestick in Downtrend
A spinning top appearing in strong downtrend indicates that the bears are starting to lose control. It may not directly mean anything really as this happens quite often.
The fact that we were in strong bearish trend means the bears were in complete control , a spinning top indicates indecision. This means the bulls tried to make an entry, but it was unsuccessful, at least on that very day / timeframe.
Two things may happen from here , the spinning top might just be a small breather by bears as they gather the steam again and push the markets lower and lower. This happens more often that the other possibility which is bulls actually taking control and pushing prices higher.
For a spinning top to work as a reversal pattern , it generally will need some more confirmation signals such as multiple spinning tops , loss of momentum , lower volume etc. A spinning top will very rarely directly start a reversal.
A trader should look for a breakout candle and enter above the low of the spinning top on the sell side and place the stop loss at the high of the spinning top. Traders need some other confirmations , such as short term trendline break , trend continuation patterns etc.
Spinning top candle with high volume
Spinning top candle pattern can be used for trading along with the volume information. Generally, a high volume associated with a spinning top candlestick pattern is normal as there is indecision in the market.
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.
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.
Frequency of Spinning Top candlestick pattern
As per encyclopedia of candlestick charts the frequency of appearance is Very high, they appear in all time frames all the time. 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.
Frequency: 1st out of 103. Indicating that they are the most frequent occurring pattern in the 103 patterns assessed by the authors.
Trading Importance of Spinning Top candlestick pattern
As per encyclopedia of candlestick charts: The overall performance rank is 73, which is well down the list , 1 being the best out of 103 patterns studied by the authors.
Limitations of Spinning Top Candlestick Pattern
There are three main limitations of spinning top candlestick pattern.
- The patterns appear far too frequently , meaning most of the time its importance is low in terms of indicating a reversal or something special. They also appear very often when market is moving sideways which can be confusing.
- In case spinning top is used for trading , stop loss is placed at the high or low of the candle. Considering the shadows are very large , the stop loss is also very large, and this makes it difficult to get the right risk to reward ratio.
- Spinning top candlestick also does not give any indication regarding the possible price target to exit the trade. Assessing the reward potential is difficult and needs other means.
What are the main differences between a Doji and a Spinning Top pattern?
Both Spinning Top and Doji have long wicks. The main difference between a Doji and Spinning Top is that the real body in case of Spinning Top is small but non-zero and in case of Doji it is almost zero.
Doji candles resemble a cross or plus sign, depending on the length of the shadows. The prominent trait of a doji is an extremely narrow body, meaning that the open and close prices are the same or very nearly the same. The high and low for the day determine the length of this candle’s upper and lower shadows.
A Doji has different variations such as Doji dragonfly , Doji gravestone , Doji star etc. and each version has its own significance in trading depending upon where it appears on the chart.
Spinning tops are quite similar, but their bodies are slightly larger, where the open and close are close to each other and not same. The main difference is a spinning top always has long wicks or shadows on either side, indicating a large variance in the high and low. A spinning top also signals weakness in the current trend, but not necessarily a reversal.
If either a doji or spinning top is spotted, look to other indicators, such as Bollinger Bands, ATR bands , momentum reversal or continuation patterns to determine if they are indicative of trend continuation or reversal.
You can read about Doji candlestick pattern and how to use it in trading in detail in this article.
Spinning top vs Hammer candlestick pattern
Both spinning top and Hammer have small body non-zero body and long wicks. The main difference between a Hammer and Spinning top is that the Hammer has no wick on the top side , while spinning top has wicks on both sides.
Hammer generally comes at the end of a downtrend and indicates bullish reversal , whereas Spinning top indicates indecision in the market.
Hammer is a bullish pattern , while spinning top has no bullish or bearish bias.
Spinning top vs Shooting star candlestick pattern
Both spinning top and shooting star have small body non-zero body and long wicks. The main difference between a shooting star and Spinning top is that the shooting star has no wick on the bottom side , while spinning top has wicks on both sides.
Shooting star generally comes at the end of an uptrend and indicates bearish reversal , whereas Spinning top indicates indecision in the market.
Shooting star is a bearish pattern , while spinning top has no bullish or bearish bias.