Explain the Spinning Top and Doji candlestick pattern

Technical Analysis
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Also include the candlestick image of the Spinning top and Doji pattern.

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This Varsity Article on the Spinning Top(ST) takes you through what a ST is comprised of, ST in a downtrend, ST in an uptrend and the Doji.

This is what a Spinning Top looks like -

It consists of the small real body, the upper shadow and the lower shadow.

This article will take you through how the spinning top gives out useful information with regard to the current situation in the market.

This is what a Doji looks like -

The Doji’s are very similar to the spinning tops, except that it does not have a real body at all.
This means the open and close prices are equal. Doji’s provide crucial information about the market sentiments.

Key takeaways from this chapter -

  1. A spinning top has a small real body. The upper and lower shadows are almost equal in length
  2. The colour of the spinning top does not matter. What matters is the fact that the open and close prices are very close to each other
  3. Spinning tops conveys indecision in the market with both bulls and bears being in equal control
  4. Spinning top at the top end of the rally indicates that either the bulls are taking a pause before they can resume the uptrend further or the bears are preparing to break the trend. In either case, the trader’s stance has to be cautious. If the trader’s intent is to buy, he is better off buying only half the quantity and he should wait for the markets to move in his direction
  5. Spinning top at the bottom end of the rally indicates that either the bears are taking a pause before they can resume the down trend further or the bulls are preparing to break the trend and take the markets higher. Either case, the trader’s stance has to be cautious. If the traders intent is to buy, he is better off buying only half the quantity and he should wait for the markets to make the move
  6. Doji’s are very similar to spinning tops. Doji also convey indecision in the market. By definition dojis do not have a real body. However in reality, even if a wafer thin body appears it is acceptable.
  7. A trader’s stance based on dojis is similar to stance taken when a spinning top occurs.
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