Spinning Top Candlestick
The spinning top candlestick pattern represents a possible turning point in market direction. Therefore, the spinning top becomes increasingly relevant when it appears in an established trend. The spinning top is composed of a small body with small upper and lower shadows.
Spinning Top Candlestick Analysis
Similar to the doji
, the spinning top candlestick pattern signals a possible reversal in trend. For example, when a spinning top appears in an established uptrend – a reversal to the downside may be approaching. Conversely, when a spinning top appears in an established downtrend – there may soon be a reversal to the upside.
The spinning top candlestick pattern becomes increasingly relevant when the following occur:
- The spinning top is true to form with a small body and an virtually equal upper and lower shadows.
- It is preceded by a strong trend.
- Confirmation candles are used to confirm the reversal.
- Overbought or oversold indicators confirm a change in market direction.
Forex Trading Ideas
The spinning top may be traded alone, or with a combination of signals and/or indicators. For example:
- Step 1 – Wait for a spinning top to appear during an established trend.
- Step 2 - Confirm the trend reversal with at least one confirmation candle.
- Step 3 – Further confirm overbought or oversold conditions using the RSI – Relative Strength Index.*
- Once conditions 1 – 3 are met place an entry order.
* Additional confirmation ideas – confirm the doji formation when it appears outside of the Bollinger Band or when the Stochastic Oscillator signals oversold or overbought conditions.
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