The spinning top candlestick pattern is a crucial signal of market indecision. When you see this pattern, it tells you that neither buyers nor sellers were able to gain control during the trading session. Understanding how to interpret spinning tops can help you anticipate potential trend changes and avoid entering trades at the wrong time.
What is a Spinning Top?
A spinning top is a candlestick with a small body located in the middle of the candle, with upper and lower shadows (wicks) of roughly equal length. The small body indicates that the opening and closing prices were very close together, while the long shadows show that price moved significantly in both directions during the session.
Key Visual: Think of a spinning top like a toy spinning top. The small body in the center represents the axis, while the long shadows on both sides represent the balance. The pattern literally looks like its namesake.
Characteristics of a Spinning Top
To properly identify a spinning top, look for these features:
- Small real body: The body should be small relative to the overall candle range
- Long shadows: Both upper and lower shadows should be present and roughly equal
- Color does not matter: The candle can be bullish (green) or bearish (red)
- Body position: The body should be near the middle of the total range
What a Spinning Top Means
The spinning top tells a story of battle and stalemate. Here is what happened during the trading session:
The Psychology Behind the Pattern
- Buyers pushed the price up, creating the upper shadow
- Sellers pushed the price down, creating the lower shadow
- Neither side won decisively
- The price ended up very close to where it started
This indecision often occurs at important turning points in the market, when the prevailing trend may be losing momentum.
When Spinning Tops are Most Significant
After an Uptrend
When a spinning top appears after a sustained uptrend, it suggests that buyers are losing conviction. The bulls tried to push higher but sellers pushed back. This could be an early warning that the uptrend is weakening and a reversal might follow.
After a Downtrend
Similarly, a spinning top after a downtrend indicates that selling pressure may be exhausting. The bears tried to push lower but buyers stepped in. This could signal a potential bottom forming.
At Support or Resistance
Spinning tops that form at key support or resistance levels are particularly meaningful. They show the market is truly undecided at these critical price points.
Trading Strategies with Spinning Tops
Strategy 1: Wait for Confirmation
The most important rule with spinning tops is to never trade them alone. Always wait for the next candle to confirm direction.
Example: Potential Reversal Setup
Stock ABC has been trending up for weeks and forms a spinning top at $100:
- Spinning top opens at $99, highs $103, lows $96, closes at $100
- Wait for the next candle
- If the next candle is strongly bearish, consider a short position
- Entry: Below the spinning top low at $95.50
- Stop loss: Above the spinning top high at $103.50
Strategy 2: Trend Continuation Filter
Use spinning tops as a warning to avoid entering new positions in the trend direction. If you see a spinning top, wait for the trend to resume before adding to positions.
Strategy 3: Combine with Other Indicators
Spinning tops become more powerful when combined with other technical analysis tools:
- RSI: Look for overbought or oversold conditions alongside the spinning top
- Moving averages: Check if price is extended far from key moving averages
- Volume: High volume spinning tops show more significant indecision
- Support/Resistance: Spinning tops at key levels are more meaningful
Spinning Top vs Doji
Spinning tops and doji candles are often confused because both show indecision. Here is the difference:
- Doji: The open and close are exactly (or almost exactly) the same, so there is virtually no body
- Spinning Top: Has a small body, meaning open and close are different but close together
Both patterns signal indecision, but a doji represents even more extreme indecision than a spinning top.
Common Trading Mistakes
- Trading without confirmation: Never enter a trade based solely on a spinning top
- Ignoring the trend: Spinning tops are most significant after extended trends
- Missing context: A spinning top in the middle of a range means little
- Forgetting risk management: Always use stop losses, even with confirmation
- Over-interpreting: Not every spinning top leads to a reversal
Multiple Spinning Tops
When you see multiple spinning tops in a row, it amplifies the indecision signal. This often occurs during consolidation periods before a significant breakout. The more spinning tops that form, the more energy is building for an eventual decisive move.
Trading Multiple Spinning Tops
- Identify the range created by the spinning tops
- Wait for a breakout above the highs or below the lows
- Enter in the breakout direction with a stop loss on the opposite side
- The target is often at least equal to the range height
Best Timeframes for Spinning Tops
Spinning tops appear on all timeframes, but their reliability varies:
- Daily and Weekly: Most reliable for swing traders
- 4-hour: Good for short-term swing trades
- 1-hour: Useful for day traders with confirmation
- Shorter timeframes: Less reliable, more noise
Track Your Pattern-Based Trades
Pro Trader Dashboard helps you analyze which candlestick patterns work best for your trading style. See detailed statistics on your win rate and profitability by pattern type.
Summary
The spinning top candlestick pattern is a powerful indicator of market indecision. When you see one, especially after an extended trend or at a key level, pay attention. While spinning tops should never be traded in isolation, they provide valuable warning signals that the market mood may be shifting. Always wait for confirmation and use proper risk management when trading these patterns.
Learn more about candlestick analysis with our guides on the hanging man pattern and inside bar strategy.