A spinning top candlestick pattern reflects indecision in the market which simply means that buyer and sellers are pretty much at even. Spinning top is a candlestick pattern a substantially shorter body surrounded on both sides by two long candlestick wicks.
In other words, a spinning top candlestick if often regarded as a neutral candlestick.
But for my case, I don’t consider a spinning top candlestick pattern as a neutral candlestick at all.
Maybe in the perspective of buying and selling power, yes, it is a neutral candlestick by many traders simply because the sellers and buyers even out each out during the formation of the spinning top candlestick.
I consider a spinning top candlestick as a potential reversal candlestick in the context of where it forms on a price chart.
- If I see a spinning top candlestick pattern form on a major resistance level, I would consider it as a potential bearish reversal candlestick and I would place a sell stop order a few pips under the low of the candlestick. If price breaks the low of the spinning top candlestick and heads down, it just ads further confirmation that the downtrend maybe just about starting.
- Similarly, If I see a spinning top candlestick form on a major support level, I would consider it as potential a bullish signal. The confirmation is when the high of that spinning top candlestick pattern is broken and price starts rising up. So I do is to place a buy stop pending order a few pips above the high of the spinning top candlestick and then if price breaks it, I’m in on a buy trade.
This concept can be applied to trendlines, fibonaci retracment levels, price channels, chart patterns etc.
There’s a lot of setups where a spinning top candlestick patterns can be used as a buy/sell signal but the important thing is to make sure there are support/resistance levels involved before you make a trading decision.
Every time you look at a candlestick, ask yourself these questions:
- what is the story here?
- Are the bears or bulls in control or are they even?
- where is this candlestick forming in relation to significant price levels like support/resistance levels?
Every candlestick has a story to tell.
It is the same with the spinning top candlestick pattern.
To understand the meaning of why the spinning top candlestick forms in that kind of shape, you need to go deeper and understand the reasons that cause it to form that way.
Let’s look at them, shall we?
Remember, in the beginning of this article, I said that a spinning top candlestick is considered a neutral candlestick?
Well, that is because the buyers are sellers are almost equal, that’s why it is considered neutral.
The chart below explains a lot why the spinning tops form the way they do:
What do I mean by that? …When I mean color, I’m talking about the red color being bearish and green color being bullish.
You have to think in terms of where it forms:
- if a “green” spinning top forms on a resistance level, it should be considered a potential bearish signal even thought it is bullish(green).
- You apply the same logic if you see a “red” spinning top form on a support level: it should be considered a potential bullish signal even though it is bearish (red).
These two charts below explain what I’m talking about here.
Lets assume that on the first chart on the left, price is going up and hits a resistance level and moves down and the next chart to it on the right, price is going down and hits a support level and bounces up. At each of these two situations, the turning point was the formation of a green spinning top candlestick pattern. This chart shows the “green” situation:
This second chart shows the “red” situation:
See what I’m talking about?
Its all in the context of where the spinning top candlestick forms on your chart. That’s what’s important.
So the color of the spinning top candlestick pattern does not matter. It is where it forms that matters.
I totally ignore any spinning top candlestick that does not form in levels of significance. What do I means by levels of significance?
Well, its these:
- support levels
- resistance levels
- trendlines (trendlines provide dynamic support and resistance levels)
- Fibonacci retracement levels
- price confluence levels
They are important prices which I search for and identify ahead of time and i quickly wait to determine if cost reaches these types of levels.
And when price gets to these important prices, next thing I actually do is watch to determine if any kind of reversal candlestick types, including the actual spinning best, which might give me personally a clue of the very likely path price will take and so i prepare to consider a trade in line with the clue We get through these change candlesticks.
This is the way you trade utilizing price motion. It is actually nothing complex.
Price motion trading is about identifying essential levels after which wait with regard to price hitting these amounts, then search for the buy/sell indicators and for your, you make use of reversal candlesticks after which place your own trade.
Can a person trade the actual spinning best candlestick by itself without thinking about other elements like support amounts, resistance amounts etc?
Check it out if a person want…
But in my experience, that doesn’t make any kind of sense whatsoever.
The easiest way to trade re-writing top candlesticks for me is, when i said over, to trade them once they form in amounts of significance.
The re-writing top candlestick could be applied in order to Forex trading methods like:
That which you do is actually place the pending buy stop/sell cease order several pips over the high/low and await price to verify your analysis having a breakout within the desired path.
The incredible thing regarding spinning best candlesticks as well is that they’ll allow you to definitely trade having a tight stop loss which can help to make make your own trading danger: reward ratio great.
In additional words, the stop loss distance is rather small in contrast if you’re trading along with other change candlesticks which have very long physiques where you need to place your own stop loss a reasonable long range away therefore drastically lowering your risk: incentive ratio.
That during my mind may be the real elegance about trading re-writing tops.
Where you can place stop loss?
Just a couple pips underneath the low/high of this spinning best candlestick. Think about the spreads whenever you place stop loss.
If cost is too near to your admittance price, don’t do this, instead, search for the closest swing low/high as well as place your own stop loss presently there.
So there you’ve it, a little bit of lesson how to trade using the spinning best candlestick designs.
the re-writing top candlestick pattern is recognized as a natural pattern however in the framework of exactly where it types, it gets a change candlestick pattern and also the breakout from the low/high is usually the verification that price will reverse.
spinning covers can form in most timeframes although not all re-writing tops are made equal. The essential spinning tops you ought to be watching away for are the ones that form upon significant prices and the primary ones tend to be support as well as resistance prices.
remember, the colour of the actual spinning best candlestick doesn’t matter.
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