Reading candles
Spinning top
A small body with wicks on both sides that are longer than the body.
Tested more than once and no dependable profit survived costs.
Tests on stocks, index futures and EURUSD mostly find no reliable profit once costs are counted; the few positive results are in stock markets and depend on the exit rule. A pattern describes what price just did. It is not a forecast.
What it is
Similar to a doji but with a slightly larger body. The wicks are roughly balanced.
What it suggests
A pause with two-way movement inside the period. As with a doji, the next candle carries the information.
How to check it
Wait for a close beyond the spinning top's high or low before reading a direction.
Common mistakes
- Reading direction from its color.
How we will test it
On public price history, never on anyone's account. Until it is done, the note above is all we can honestly say.
- Cases: a spinning top in a trend
- Measure: share of cases where price closes first beyond its high versus its low
- Window: until one side closes
- Compared with: any candle of similar range
Sources
- Marshall, Young and Rose (2006), Candlestick technical trading strategies: can they create value for investors? Journal of Banking & Finance 30(8) (citation and headline finding only)
- Duvinage, Mazza and Petitjean (2013), The intra-day performance of market timing strategies and trading systems based on Japanese candlesticks, Quantitative Finance 13(7) (abstract or primary page read)
- Fock, Klein and Zwergel (2005), Performance of candlestick analysis on intraday futures data, Journal of Derivatives 13(1) (citation and headline finding only)
- Orquin-Serrano (2020), Predictive power of adaptive candlestick patterns in forex market: EURUSD case, Mathematics 8(5) (abstract or primary page read)
- Lu, Chen and Hsu (2015), Trend definition or holding strategy: what determines the profitability of candlestick charting? Journal of Banking & Finance 61 (citation and headline finding only)
Related lessons
Written in our own words. Education only, not financial advice.