What Is a Spinning Top Candlestick?
A spinning top is a candlestick with a small body and long wicks on both ends, representing indecision in the market. This pattern often appears before strong breakout moves and can be used as a key signal in multiple timeframes.
2-Candle Spinning Top Setup (Daily Timeframe)
Step 1: Identify the Pattern
On the daily (1D) chart, look for two consecutive spinning top candles. Both candles should have similar open and close prices, showing market hesitation.
Step 2: Mark the Breakout Zone
Draw horizontal lines at the highest high and lowest low of the two candles. This creates your breakout range.
Step 3: Entry Conditions
On the following day, enter a trade when price breaks above or below this range. A break above signals a long entry; a break below signals a short entry.
Step 4: Stop Loss Placement
Place your stop loss just outside the opposite end of the range. If the candles are too large, shift to a lower timeframe like 1-hour or 15-minute and place your stop at a closer structure point to reduce risk.
Single Spinning Top Setup (Weekly & Monthly Timeframes)
On higher timeframes like weekly or monthly charts, a single spinning top candle can indicate major market indecision. This setup is ideal for longer-term positional trades.
- Identify one clear spinning top candle on the weekly or monthly chart.
- Mark its high and low.
- Enter on a breakout of the high (long) or low (short) in the following period.
- Set your stop loss just beyond the candle wick.
Minimum Target: 1:5 Risk-Reward
Since you’re trading off higher timeframes, your targets can be significantly larger. Aim for at least a 1:5 risk-to-reward ratio. Use trailing stops or move SL to breakeven as the trade progresses.
Conclusion
The spinning top breakout strategy offers a simple yet highly effective way to capture price movements across multiple markets. Whether you’re swing trading on the daily or taking long-term trades on the weekly or monthly, this pattern provides a reliable edge when combined with good risk management.
