Spinning Tops

The Spinning Top is a unique candlestick pattern characterized by its small real body and long upper and lower shadows. It does not provide a clear entry or exit point by itself, but it offers valuable insight into the market's current state—indecision and uncertainty.

The small real body suggests that the opening and closing prices are close, meaning neither buyers nor sellers were able to dominate the session. The presence of long shadows on both sides indicates that both bulls and bears made significant moves during the day, but neither could maintain control.

Structure Breakdown

• Small real body: Indicates that the open and close prices are nearly equal, reflecting market indecision.
• Upper shadow: Shows that bulls tried to push the price higher but failed to hold those gains.
• Lower shadow: Shows that bears attempted to drive the price lower but were unsuccessful.

This tug-of-war results in a candlestick that lacks strong directional movement and reflects hesitation in the market. While the Spinning Top itself is neutral, its significance increases depending on where it appears on the chart.

Spinning Tops in a Downtrend

In a downtrend, a Spinning Top can signal that bearish momentum may be slowing. Although it does not confirm a reversal, it hints that bears might be consolidating, or that bulls are starting to push back, albeit weakly.

Traders may interpret this as a potential turning point. However, given the uncertainty, a cautious approach is advisable:

• Partial entry: Buy with only a portion of your intended quantity, e.g., 50%.
• Wait for confirmation: Enter more aggressively if the next candle supports the reversal.
• Risk control: Exit quickly if the trend resumes downward.

Spinning Tops in an Uptrend

When observed in an uptrend, Spinning Tops indicate that the bullish run may be slowing down. This could be due to profit-booking or hesitation among buyers. Bears might be trying to take control but haven't succeeded yet.

Traders holding long positions may consider trimming their exposure to lock in profits:

• Sell half: Exit 50% of your holding to secure gains while staying in the trend.
• Watch for reversal: If the price drops, you’ve already secured partial profits.
• Ride the trend: If the price rises again, the remaining 50% benefits from continued upside.

Trading Psychology Behind the Spinning Top

The Spinning Top symbolizes a tug-of-war between buyers and sellers where neither side dominates. Market participants are uncertain, waiting for further information before committing. The small real body reflects a day of hesitation and low net movement despite intraday volatility.

This is why Spinning Tops are often seen before significant price moves—it represents a calm before the storm, where the market is deciding its next direction.

Key Takeaways

• Spinning Tops have a small real body and long upper and lower shadows.
• They represent indecision and neutrality in the market.
• When appearing after a trend, they may suggest a possible reversal or pause.
• Confirmation with the next candle is essential before making trading decisions.
• Traders should reduce position size or take partial action based on trend context.