Spinning Tops and High Wave Candlesticks

Filed under: Learn Forex Trading |

Today, I would like to briefly talk about a couple of candlestick patterns that I have not mentioned before. I usually favor candlestick patterns such as pin bars, engulfing patterns, and inside bars, all of which I have covered in previous articles. However, there are many other candlestick patterns of the more subtle variety, which can tell you a lot about the psychology of the market. The spinning top and high wave candles are two such patterns.

 

Spinning Tops

begin with the spinning tops. If you look at Figure 1, you will see that they are single-candlestick patterns (as opposed to patterns such as inside bars which happen over two candlesticks). A spinning top is characterized by having a small real body (the chunky black or white part) and short upper and lower shadows (the wicks). What we can derive fro this pattern is that the market participants are indecisive and there is little pressure from either the bulls or the bears. This is useful because it could tell us that a trend is losing steam and could soon reverse. However, the pattern has little significance when there is no dominant trend in place.

 

High Wave Candles

High wave candles (see Figure 2), like the spinning tops, also have a very small real body. However, what is different from the spinning tops is that high wave candle also have unusually long upper and lower shadows. This tells us that the market is in a state of confusion, and is moving up and down without really knowing which direction it wants to go in. The Japanese call this a high wave candle in comparison to some choppy ocean waves. The market is choppy, it is going up and down (just like some ocean waves), and it has no real direction.

 

These candlestick formations are yet another useful tool to put in your arsenal and give you just a little bit more information about the psychology of the market.

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