Is there a pattern representing indecision about the future direction of the price? Yes, it’s called a spinning top. So, what does this pattern look like, and where on the chart can you find it?
When do spinning tops occur?
If you’ve been trading traditional and crypto markets long enough, then you probably know that sometimes at the close of a trading time frame neither sellers nor buyers gain the upper hand. These moments of indecision mean that during the trading period bulls were pushing the value of the asset up whereas the bears were pushing down, too.
As a result, at the end of the trading time frame, the closing price came very near to the open. At the time like this when you don’t know where the trend will go and wait for the confirmation, spinning tops start popping up on the chart here and there, which indicates a potential price reversal. This normally happens either on top of the chart or at the bottom of it.
What do spinning tops mean?
If you find this pattern at the bottom of the chart, it might mean that the bears are losing control; and vice versa: when seeing this pattern on top, it may very well signal the change in the uptrend.
Are spinning tops easy to spot on the chart?
Yes, they are. Take a look at the picture down below. This candles’ short real body is vertically centered in the middle and normally small. It is so because the difference between the open and the close prices is insignificant.
As you can see, spinning tops are symmetrical, with upper and lower shadows of approximately equal length.
While pinning faith to this simple yet beautiful pattern, don’t forget that just like any other candlestick pattern, this one as well needs confirmation that will show if it’s the start of an uptrend or a downtrend.
This pattern is better to use together with other technical analysis tools, for example, Parabolic SAR and MACD.
Isn’t spinning top the same with doji?
No, dojis are different. They have small real bodies and long upper and lower shadows, which looks this way because an open and close are virtually equal.
However, both patterns, doji and spinning top, represent a certain level of traders’ indecision about the next move of the price.
Spinning tops’ limitations
Even though spinning tops were designed to forecast reversals, it’s not always the case. They require confirmation, however, sometimes confirmations can’t guarantee that the asset’s price will go in a certain direction.
If you want to use spinning top, you should probably go with other candlestick patterns also, utilizing extra technical analysis tools and trading strategies.
Just like a night is followed up with a day, and the name of TradeSanta is inevitably associated with crypto bots, professional traders have knowledge of different patterns in their arsenal.
Spinning tops occur in the moments of traders’ indecision and pop up on the chart when neither sellers nor buyers gain the upper hand at the close of a trading time frame. As a result, the closing price comes very near to the open.
This pattern is symmetrical, with upper and lower shadows of approximately equal length and a short real body.
Depending on their positioning, spinning tops might mean that either bears or bulls lose control, but the trend reversal requires confirmation. However, even confirmation doesn’t always mean that the price will change.
That’s the reason why spinning tops are good to go with other technical analysis options such as MACD and Parabolic SAR.
Although spinning tops look somewhat like dojis that indicate indecision, too, the dojis are slightly different in shape, and with them, there is virtually no difference between the close and the open.