What are Doji and Spinning top candlestick patterns? In this blog, we will look into two very important candle patterns.
Doji and spinning top candles are two important candlestick patterns that traders use to interpret market sentiment and make informed trading decisions. In this article, we’ll discuss what doji and spinning top candles are, how they are formed, and how traders use them to make trading decisions.
What is a Doji Candle?
A doji candle is a candlestick pattern that signals indecision in the market. It is formed when the opening and closing price of a security is almost the same, resulting in a candle with long wicks on both the upper and lower end. The long wicks show that both buyers and sellers have attempted to push the price in opposite directions, but neither side was able to gain control. This results in a candle with a small real body that is often situated near the middle of the candle’s high and low range.
What is a Spinning Top Candle?
A spinning top candle is a similar pattern to the doji candle, but it is formed when the real body of the candle is larger and the upper and lower wicks are still relatively long. The spinning top candle also signals indecision in the market, as the larger real body shows that both buyers and sellers have taken control of the price at some point during the trading session, but neither side was able to gain a sustained advantage.
How to Use Doji and Spinning Top Candles in Trading
Doji and spinning top candles are most effective when used in conjunction with other technical analysis tools, such as trend lines, support and resistance levels, and moving averages. Traders often look for doji and spinning top candles at key levels of support and resistance, as they can signal a potential reversal in the trend.
In the pic above, the first green candle is close to what doji would look like. The third red candle which has a thicker body is close to what a spinning top would look like.
For example, if a doji or spinning top candle forms at a key resistance level, it may indicate that the price has reached a top and that a downward trend could soon follow. On the other hand, if a doji or spinning top candle forms at a key support level, it may indicate that the price has reached a bottom and that an upward trend could soon follow.
The other common single candlestick patterns are Marubozu and Inverted Hammer. Please click on respective links to access the blog.