Spinning Top Complete Guide

What is Spinning Top?

The Spinning Top is a single-bar candlestick pattern characterized by a small real body situated between long upper and lower shadows. This structure indicates a period of significant indecision where neither the bulls nor the bears could gain a definitive advantage by the close. While the price fluctuated significantly during the session, the opening and closing prices remained relatively close to each other. According to Steve Nison, the father of modern candlestick charting, the spinning top represents a loss of momentum in the prevailing trend. If it appears after a long uptrend, it suggests the bulls are tiring; conversely, after a sharp downtrend, it suggests the bears are losing their grip. Technically, the color of the body is less important than the context of the preceding trend. Thomas Bulkowski’s research in the 'Encyclopedia of Candlestick Charts' suggests that spinning tops are frequently neutral, acting as a continuation of the existing trend about 51% of the time, making them essentially a coin flip without further confirmation. Bulkowski's data indicates that while they are ubiquitous, their 'Performance Rank' is often in the bottom half of all candlestick patterns because they lack a strong directional bias. Volume plays a crucial role; high volume during a spinning top often signifies a 'churning' environment where heavy buying and selling are occurring without price progress, often a precursor to a trend reversal. However, Bulkowski notes that the overall reliability of the pattern increases when it forms near established support or resistance levels. Traders should look for a breakout above or below the spinning top's shadows on the subsequent bar to determine the next directional move. It is most effective when used in conjunction with oscillators like the RSI or MACD to identify overextended conditions.

Identification Rules

1. The real body is small relative to the total length of the candle.
2. Both upper and lower shadows are present and typically longer than the real body.
3. The pattern appears within an established uptrend or downtrend.
4. The color of the real body (black/red or white/green) is secondary to the structure.

References

• Thomas N. Bulkowski (2005). Encyclopedia of Chart Patterns.
• Steve Nison (2001). Japanese Candlestick Charting Techniques.

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