The Study Of Stock Market Through Technical Analysis

Lesson -> The Single Candlestick Pattern - Section 2

6.1 - Candlestick through spinning top

The spinning top makes a great candlestick. It does not provide traders with a trading signal, unlike the Marubuzo. The spinning top provides useful information about the market's current state. This information can be used by the trader to position himself on the market.

Two things stand out...

  • The candles have a very small body.
  • The shadows are almost equal in height.

What would you have thought happened during the day that led to the creation of a spinning top. The spinning top may look like a simple candle with a small body, but there were some dramatic events that occurred during that day.

Let's follow these events.

  1. Small bodyThis means that the close price and open price are very close. The open price could be 210 and the close at 213. Or, the open could be at 210 and close to 207. These situations create a small real body since a move of 3 points on 200 Rupee stock does not seem to be significant. The colour of the candle doesn't really matter because the close and open price points are very close to each other. You could use a blue candle or a red one. What really matters is that both the close and open prices are within easy reach of each other.
  2. The upper shadowThe upper shadow connects to the highest point of the day. If it's a red candle, then the high and open are connected. If it's a blue candle, then the high and close are linked. What do you think happened if you consider the real body with the upper shadow and the lower shadow? The presence of the shadow indicates that the bulls tried to move the market higher. They were not successful in their endeavor. If the bulls had been truly successful, the true body would have been a long-lasting blue candle rather than a very short one. This can be considered an attempt by bulls to lift the markets, but it was not really successful.
  3. The lower shadow is -The shadow at the lower end connects the body to the lowest point of the day. If it's a red candle, then the low and close are linked. If it's a blue candle, then the low and close are connected. How would you feel if the real body was viewed in combination with the shadows below it, but ignoring the shadows above? The bulls experienced the exact same thing. The bears tried to lower the market by putting out the lower shadow. They were not successful in their endeavor. If the bears had been truly successful, the true body would have been a long red candle and not a very short candle. Although the bears tried to lower the market, it can only be considered an attempt.

Consider the spinning top as an entire thing, including all its parts. Real body, upper shadow and lower shadow. The bulls tried unsuccessfully to move the market higher. The bears attempted to lower the market, but it failed too. The small real body makes it clear that neither the bulls nor bears had any influence on the market. Therefore, spinning tops indicate a market that is indecisive and uncertain.

A spinning top is not much if you just look at it.It conveys indecision, as both bears and bulls were unable to influence the markets.The spinning top indicating the chart trend is a powerful message that you can use to position yourself in the markets.

6.2 - The downtrend effect for spinning top

What if the spinning tops occurred when the stock was in a downtrend.

The bears have complete control in a downtrend as they can grind the prices lower. The spinnin' top in the downtrend could indicate that the bears are consolidating their position and may re-start selling. Although unsuccessful, the bulls tried to stop the price drop and held on to their position. If they had been successful, it would have produced a good blue candle, not a spinning top.

What stance do you take when there are spinning tops during a downtrend. It all depends on our expectations for the future.Two scenarios can be concluded with similar probabilities


  1. Or, there may be another round.
  2. The markets could also reverse their direction, which could lead to higher prices.

The trader must be ready for both possible outcomes, even though there is no way to predict what might happen. Reversal and continuation.

If the trader was waiting for the right opportunity to take a position on the stock, this could be it. To be safe, he could only test the waters with half of the stock. The trader could buy 500 shares if he has 250 shares. He can then wait to see if the market changes. If the market changes its direction and prices rise, the trader could buy more shares to average out the increase. The trader would have most likely bought stocks at the lowest price if the market reverses.

The trader may exit the trade if the stock begins to fall and claim a loss. The loss on the stock is limited to half of the total quantity, and not the whole.

6.3 - The uptrend effect of spinning top

A spinning top in an upward trend has the same implications as a spinning top downtrend. However, we view it differently.

The obvious observation is that the market is in an uptrend. This implies that the bulls have had absolute control of the trading sessions. The situation is complicated by recent spinning tops.

  1. The bulls have lost control. If they had, spinning tops wouldn't be seen on charts.
  2. The formation of spinning tops has allowed bears to enter the markets. Although the bears were not successful, the emphasis should be on the fact the bulls allowed the bears to have some leeway.

What does the above mean and how can you position yourself on the market?

  1. The spinning top conveys market indecisiveness, i.e. The markets cannot be influenced by either the bulls or the bears.
  2. We can draw two conclusions when we consider the above facts in the context of an upward trend.
    1. The bulls may be consolidating their position and then initiating another leg in the up movement.
    2. Oder the bulls may be tired and give way to the bears. A correction is possible.
    3. Both of these events are equally likely, i.e. Both of these events are likely to occur at the same time, i.e. 50%

What should you do now? Both events are likely to occur. How can you decide which side to take? In such an event, prepare for both outcomes!

Let's say you bought the stock prior to the rally began. This could be your opportunity to make some profits. Profits are not available for the entire stock. If you have 500 shares, you can book profits up to 50%. 250 shares After you have done this, two things could happen:

  1. Bears enter the market. Once this happens, the market begins to fall. You have already booked 50% profit at a higher price and you can now book 50% of the remaining profits. Your net selling price will be higher than the market price.
  2. Bulls make an entry. It turns out that bulls are taking a pause. The rally continues. You're not out of the market completely, but you have at least 50% of your assets invested in the markets.

You can tackle both the outcome and your stance.

6.4 - What is Dojis

The Doji's look very similar to spinning tops except it doesn't have a body. This means that the close and open prices are equal. Doji's are a crucial candlestick pattern that provides important information about market sentiments.

Doji is a classic term that means the price at which the item is sold should be equal to its close price. You can have any length wick for the upper or lower wicks.

Keep in mind however the 2 nd Rule, i.e. The candle can still be considered a Doji if it is flexible and quantifiable, even though it has a thin body.

In the case of a thin wafer-thin candle, it doesn't matter what colour the candle is. It is important that the close and open prices were very close.

Similar implications can be drawn from the Dojis to the spinning top. The same principles that we learned about spinning tops also apply to Dojis. In fact, clusters of spinning tops and dojis are more common than you might think, indicating indecision on the market.

Remember that the market is unpredictable, so next time you see a spinning top or Doji in a group, don't be surprised if it turns out to be a Doji. You need to be able to adapt to market movements.

Key points

  1. A spinning top is small and has a real body. The lengths of the upper and lower shadows almost match each other.
  2. It doesn't matter what colour the spinning top is. It doesn't matter what colour the spinning top is. What matters most is that the close and open prices are very close.
  3. Spinning tops signal indecision in the market, with bulls and bears having equal control.
  4. The bulls may be preparing to end the trend or they might be paused before they can continue the uptrend. The trader must be careful in either case. The trader who intends to purchase should only buy half of the amount and wait for the markets' direction.
  5. The bulls may be preparing to end the downtrend and break the trend by spinning top at the bottom of the rally. In either case, traders need to be cautious. The traders who intend to buy should only purchase half of the stock and wait for the markets' move.
  6. Doji's look very much like spinning tops. Doji conveys indecision on the market. Dojis, by definition, don't have a body. In reality, a doji's body is acceptable even though it appears thin.
  7. The stance of a trader based on dojis can be similar to that taken by a spin top.