Spinning Top candlestick chart pattern formation



What is Spinning Top candlestick chart pattern?

Spinning tops are formed when the body is small and the shadows are longer. If shadow is not long but the body size is small compared to average size of previous candles,even then this can be considered as spinning top. The colour of the body can be either green or red i.e closing price can be either above or below the opening price.The most important identification factor of this formation is that the size of the body should be smaller than the size of shadows and average size of the body of previous candles.

This chart pattern usually means indecision among traders and points towards a scenario where both buyers and sellers are in equal strength. If this formation occurs after an extended move,in either direction, then it indicates exhaustion or market taking a breather. Traders should not make trading decisions based only on spinning tops, but need to wait for price action confirmation in next sessions.

Spinning top formation with high volume is more significant as this usually points to a possibility of reversal in market direction. If it occurs after a substantial upmove with high volume, then it means that even after so much buying the price was not able to move further up as sellers are also becoming more active.This usually indicates distribution of stock taking place and the traders need to keep an eye for other reversal signs.This can be a good sign to lighten the long positions.

If spinning top occurs after a substantial down move with high volume then it means that even after so much selling the price couldn’t move further down as buyers are becoming active.This usually means accumulation of stock taking place and the traders need to keep an eye for for other bullish reversal signs. This can be a good sign to lighten the short positions.

If some more small body candles get formed after spinning top formation then usually its a sign of further indecisiveness or market losing momentum. Always looks for price confirmation before you initiate any trade.


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