The spinning top candlestick pattern can best be used to create a profitable trading strategy when it occurs after a steeply angled or sustained price trend.

The spinning top candle is recognized by its short body with long shadows on both its upper and lower sides. It is commonly interpreted by traders and analysts as indicating a period in time when both buyers and sellers have actively pushed price in their favor, but without either side ultimately being able to gain a decisive victory. For this reason, the spinning top is usually taken as indicating uncertainty and market indecision, and traders therefore rarely initiate a market position based solely on the appearance of a spinning top candlestick. The one exception to this general rule is when a spinning top forms following a market trend that has been sustained for a considerable length of time without any significant corrective retracement or when it occurs after a sharp, steeply angled movement of price either up or down. In either of these situations, the spinning top candle may be a signal of impending market reversal and can provide a low-risk trading opportunity for traders to enter a market looking to profit from such a reversal.

A simple strategy for a trader to employ when a spinning top candlestick forms after an extreme run up or fall in price, or after a sustained trend that has experienced no significant retracement, is to initiate a position anticipating a trend reversal immediately after the close of the spinning top candle, either with a market order or a limit order placed at the closing price of the candle. For example, if a spinning top forms after a sharp move up in price, the strategy initiates a sell position at the candle close, with a stop-loss order placed just above the high of the spinning top candle. This strategy provides a trader with a clearly defined and relatively low risk strategy, with the opportunity for substantial profit if the market reverses direction following the spinning top formation.

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