Forex spinning top candlestick pattern is something which many analysts use to determine market signals. It denotes indecision in the market and takes place when both sellers, as well as buyers, are pushing towards the market, but by the commencement of the trading day, none emerge victorious.
This is one candlestick pattern which has a small body with long shadows and longer uppers, ensuring spinning top showcases a wide trading range. Experts also state that similar to that of a Doji formation, the spinning top also ends with a closing price which is pretty close to the opening price.
Since both buyers and sellers are not able to extend prices in their favor, there are pretty much equal odds of the market reversing, moving sideways or again continuing from its existing trend.
Experts think of Forex Spinning Top as non-Neutral!
There are numerous experts who hold the opinion that this candlestick pattern is not neutral at all. Alright, it may be in the case of procurers and bidders, but it can also serve utility for spotting out possible reversals. More so from the point where it forms upon the Price Action chart.
• Here’s explaining this with an example:
If you come across a Forex spinning top forming upon the primary resistance level, it can label as a bearish reversal candle. Traders can place their Sell Stop order of a few pips just below the Candlestick low. Say, if the price breaks this candle’s low and moves further downwards, it just affirms that a downtrend is on its way.
On the other hand, spinning tops Forex also words as a primary Support Level which in many ways denotes a Bullish signal. In order to confirm this, traders will have to see if the candlestick’s high breaks are causing the price to zoom upwards.
The thing to do here (if the case be so) is to place your Buy Stop of a few pips right over the spinning top and buy when the price breaks.
Making things all the more easier for beginners:
All those wanting to work with this spinning top candlestick, there is another crucial thing which they ought to know. And that is - the color of this candlestick may not matter at all times. To be more precise, red color denotes a bearish situation and green showcasing bullish conditions!
But this is not the case at all times. If the green top formulates upon the resistance level, then there is a potential bearish situation, even though the traditional belief is that it implies a bullish trend.
And the same kind of logic is applicable when a red takes upon the support level.
Practice with a demo account:
Forex spinning top is one candle stick pattern which if put to use in the right way can help in the market bear and bull. So learn about using this candle in demo accounts and see how it works when put to the test in real market conditions. There are numerous strategies namely trendline trading strategy or diagonal trading method which you can use. Discussions on it will be done next time around and by that time here’s wishing all traders,
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.