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...
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.
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.
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
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.
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.
What does the above mean and how can you position yourself on the market?
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:
You can tackle both the outcome and your stance.
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.