Spinning Top Candlestick: How to Trade the Spinning Top Pattern

It is neither a bullish nor a bearish pattern. The spinning top is typically interpreted as a neutral signal, indicating indecision or uncertainty in the market.

Using footprint charts can help traders better understand the dynamics behind the formation of the spinning top pattern. They can also provide more valuable information for more accurate predictions of price movements while the spinning top of uncertainty is present on the chart.

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  ✓  The candle has a small body. The opening and closing prices are close to each other, indicating minimal price change during the period.

  ✓  The candle has long shadows. The long upper and lower shadows show that both buyers and sellers tried to take control, but neither side succeeded in gaining a clear advantage.

Analysts distinguish a few variations of this pattern:

  ✓  A white spinning top candlestick – a candle where the closing price is higher than the opening price.

  ✓  A black spinning top candlestick – a candle where the closing price is lower than the opening price.

However, this does not mean that a spinning top white candle is a bullish pattern and a black one is bearish. Both types signal market indecision or a temporary balance between buyers and sellers.

In simpler terms, the spinning top resembles the toy of the same name, which balances on a thin base (the small candle body), representing the balance between supply and demand, even though the edges of the toy are far from the center (the long shadows).

July 23, 2024 – a white spinning top or green. The closing price is slightly above the opening price, approximately in the middle of the candle.

In the case of the black spinning top, the pattern emerged after the following events:

• the price surged on June 11-12 following the presentation of Apple Intelligence;
• it is likely that on June 12, sellers became active, as indicated by bright clusters above the closing price.

Therefore, the indecision shown on June 13 could have indicated that traders had doubts about whether the uptrend would have continued after the presentation, whether a correction had started, or if the trend had reversed into a downtrend.

High trading volumes for the day suggest that both buyers and sellers were active, but neither side was able to take control.

In the second case, the white spinning top appeared after several days of sideways movement, with July 19 forming an inside bar — another candlestick signaling indecision in the market.

The next day, there was a sharp drop caused by disappointing quarterly reports. This impacted major tech companies like Alphabet (GOOG) and Tesla (TSLA), whose Q2 results put pressure on AAPL’s stock price.

• In a trending market, a spinning top may indicate that the current trend is weakening, making the market vulnerable to a correction or a pause within the trend. At the same time, a trend reversal is also possible.
• In a flat market, the appearance of a spinning top within a developing range signals market sluggishness, where supply and demand are balanced.

Support and resistance levels are key factors that can provide more context. For example:

• The price was rising;
• Then it reached a resistance level;
• A spinning top formed on the chart.

In this case, the pattern can be seen as confirmation of the resistance level’s strength. However, as we will demonstrate later, volume analysis indicators and footprint charts offer the most valuable insights when interpreting candlestick patterns.

✓ A white spinning top candlestick:

• frequency: 2nd most common (very frequent);
• reversal probability: 50%;
• comment: if the price breaks out beyond the pattern, it rarely forms a significant trend.
  

✓ A black spinning top candlestick:

• frequency: 1st place (very frequent);
• reversal probability: 51%;
• comment: a 51% reversal probability in practice confirms that the pattern is theoretically interpreted as indecision.

In this instance, the candle suggests that the buying momentum, which had been strong in the days prior, was weakening. Buyers likely became cautious as the price approached a zone where sellers had the upper hand on April 14, visible from the narrow profile (2). This was followed by a price decline on April 29.

June 6 (3) – a spinning top with a narrow green body. In the context of a bullish market, this candle indicated a moment of indecision from buyers as they faced resistance at a previously established high. Sellers may have tried to slow the upward momentum, but their efforts were short-lived — the price did not pull back much and continued rallying on June 11.

Note that on the volume profile (visible due to the selected footprint mode), you can see that the volumes are concentrated near the middle of the candle and thin at the edges, which confirms the indecision.

Let’s take a closer look at two spinning top candles on Litecoin’s (LTC/USDT) daily chart:

• the market saw a price increase of more than 20% from the July 5 low;
• on July 17, sellers stepped in, which can be seen in the bright red clusters (2) as the price approached the previous high near $77.

Two consecutive spinning top candles (3). The market was clearly uncertain after more than 10 days of bulls struggling to break through the $74 resistance, while the bears’ attempt to push prices down on July 25 led to a bear trap.

Footprint analysis of the July 29 candle offered valuable insight into the most likely direction of the market. At that point (4), bulls got trapped after believing they had successfully broken through the $74-77 resistance zone. This mistake was confirmed by the strong seller activity (5) the next day, which should have given cluster chart traders a solid reason to open short positions.

What is a spinning top candle?

A spinning top candle is characterized by a small body and long wicks. The opening and closing prices are approximately in the middle of the candle. Typically, traders look for spinning tops on daily charts.

What does a spinning top candle mean?

The appearance of a spinning top indicates that the market is in a state of uncertainty, reflecting an approximate balance of power between buyers and sellers.

Is a spinning top candle bullish?

No, it is a neutral pattern and does not imply a buy signal, as has been previously stated: the pattern is interpreted as an equilibrium of forces between buyers and sellers.

Spinning top reversal candle

A spinning top candle can suggest a potential trend reversal, particularly when it appears near key resistance after a price increase. Conversely, if a spinning top forms after a price drop towards a support level, it may indicate an upcoming upward reversal. However, to validate this reversal, it is highly advisable to conduct further analysis using cluster charts to find solid confirmation.

• footprint (cluster charts);
• market profile.

Here is a strategy you can follow for trading the spinning top pattern:

✓ Step 1. Identify the pattern on the daily candle.

✓ Step 2. Switch to an intraday footprint to find support and resistance levels where you can open positions.

Here is an example of implementing this strategy on a gold price chart:

You can spot these signals by monitoring the interaction between price and horizontal volumes:

• A bulge (2) forms above the previous day’s high (which represents the spinning top), indicating a temporary balance between buyers and sellers.
• The price drops below this bulge (3), suggesting that the initial positive reaction to the news released at noon was mistaken.
• Based on the above observations, you open a short position at the test of the bulge (3).

A stop-loss – above the intraday bulge.
The target – below the previous day’s spinning top candlestick, as the earlier indecisiveness seems to be giving way to seller dominance.

To try the simulator, download the ATAS platform for free, install, and launch it, and then:

1. Open a chart of a financial instrument.
2. Click on the Market Replay button in the main ATAS menu.
3. Activate the Replay mode (the icon should turn green).
4. Adjust settings like date and data type if needed.
5. Start the replay and keep an eye out for candlestick patterns. Explore the footprint charts to uncover strong reasons for entering a trade.

However, thanks to the footprint chart, you have clear evidence that the market is not in a state of indecision. Instead, the bulls are active, as the 08:15 candle closed above a large green cluster (7) near the 18695 level.

Following the lead of the bullish traders, you could enter a buy position in these instances:

• at the low of the 08:30 candle during the test of the 18695 level;
• at the 08:45 candle as it pulls back from resistance (8);
• at the 09:00 candle upon breaking through resistance (8);
• At the 09:15 candle during the retest of the breakout of resistance (8).

Developing your ability to read modern footprint charts can greatly improve your candlestick pattern trading, even if you consider those patterns to be outdated.

At its core, the spinning top is not bullish, bearish, trend-following, or a reversal signal. It is considered a neutral pattern. Traders typically either wait for further developments or look for additional signals to make their decisions.

✓ Interpretation. The pattern typically signals indecision and market balance, which often aligns with real market behavior.

✘ Subjectivity. Traders might find it challenging to assess the exact proportions of the candle’s shadows and body when identifying the pattern.

✘ There are no clear guidelines on placing stop-loss and take-profit orders. Placing stop-losses beyond the pattern’s extremes can conflict with risk management strategies, especially if the candles are large.

Download ATAS. It is free. Once you install the platform, you will automatically get the free START plan, which includes cryptocurrency trading and basic features. You can use this plan for as long as you like before deciding to upgrade to a more advanced plan for additional ATAS tools. You can also activate the Free Trial at any time, giving you 14 days of full access to all the platform’s features. This trial allows you to explore the benefits of higher-tier plans and make a well-informed purchasing decision.