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Reliable buyer and seller sentiments drive the equity market. They decide whether market indices rise or fall. There are times when neither selling nor buying trends are strong enough for the market to move in a certain direction. The market becomes stuck in limbo and is governed by indecision. How can you capture these moments of uncertainty? Can an analytical chart or tool be used to show when market trends are weak? Yes, the answer is yes. To gauge market uncertainty, traders look for a spinning TOP candlestick pattern. A spinning top candle is a sign that a trend is about to reverse. But it's also a signal that neither buyers nor sellers have an advantage.
Look for a figure with equal lengths in both the upper and lower shadows, if you're trying to find a spinning top chart candle. The main body is small and shows only a slight difference in closing and opening prices. The unique appearance of the main body is due to the market pull between buyers and sellers. The price is pushed up by buyers, while sellers attempt to lower it. Both fail to maintain the change. This results in a candlestick that is short and has elongated shadows on either side. This could indicate that market participants are losing faith in the current trend and that a reversal may be just around the corner.
After a strong buying or selling trend, a spinning top can be formed. This happens after a strong uptrend and buyers lose some control of the market. It could indicate a near-term downward trend.
The spinning top candlestick pattern indicates uncertainty around an underlying asset. While the shadows/wicks do not necessarily indicate a trend reversal, they can provide valuable support information for trading strategies. It can appear at any time during bullish or bearish movements, as well as sideways.
A bullish spinning top will be coloured green, while a bearish one will be coloured red. They can be identified in a candlestick chart by using different colours.
It is formed when opposite sentiments are equally strong. This results in the same closing and opening prices. The asset's price moves either way during the period, but it closes at the opening price.
The spinning top candlestick is part of the Japanese candlestick pattern repository. It has distinctive features and follows the same logic as Doji.
Contrary to Marubozu (another member of the Japanese candlestick group), spinning top patterns do not give trading indicators with specific entry and exit points. What should you do if you see a spinning top on the candlestick chart.
It is not easy to spin top forms in uncertain market trends. But what happened when it first appeared, and what causes it develop? Let's look at each component separately to understand the concept.
A small real-body: This is the real-body of a candlestick that shows the closing and opening prices for a given day. A short real body means that both the opening and closing prices of an asset are very similar. Let's say that an asset has an opening price of Rs 210. It may close at Rs 213 high or low, depending on its rate. These differences are extremely small, which results in a very short real-body.
The Upper Wick: This connects the day’s high to the real body. If the candle is a bull, the upper wick connects to the close value.
Lower Wick: This shows the lowest point in the day. The close value is the one that is affected if it is a bearish or red candle. If it is a bullish spin top, it will connect to the real body's opening value.
If we look at the entire upper and lower portions separately, we can conclude that the bear and bull factors failed to move the market in a single direction. This results in market indecision.
A spinning top by itself is not indicative of any trend. A chart must show a bullish or bearish spin top. The next candle must then confirm the direction. The best traders wait and watch for a trend to confirm before planning entry or exit. They won't change their opinion or position on the market until they see more clear patterns in the chart.
Here's how to create a trading strategy.
The spinning top candlestick pattern is not a reliable indicator. It is a sign of a possible trend reversal, and investors can see when market sentiment is changing. To avoid making a mistake in your decision-making, it is important to be aware when a spinning top appears on a chart.
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