Bullish Spinning Top

The bullish spinning top, also known as the white spinning top, is a single-bar Japanese candlestick pattern representing indecision. 

But what if I told you that this spinning top pattern represents incoming volatility and can be traded profitably according to our 21-year backtest across the crypto, forex, and stock market?

Would you be interested?

If so, keep reading if you want to learn the best bullish spinning top trading strategy.

What Are Bullish Spinning Top Candlestick Patterns?

Bullish Spinning Top Candlestick Pattern Illustration © Analyzing Alpha
Bullish Spinning Top Candlestick Pattern Illustration

The bullish spinning top is a frequently occurring one-bar candlestick pattern that supposedly represents indecision. 

The spinning top gets its name from the kid’s toy.

Bearish Spinning Top on Mirror

And while most technical traders think this pattern is a neutral pattern with zero profit potential, history tells us otherwise.

But before we cover how to spin our portfolio profits to new heights, let’s learn how to identify this spinning candlestick.

How to Identify the Bullish Spinning Top Candlestick Pattern

Bullish Spinning Top Candlestick Pattern on the Enphase Energy (ENPH) November 3rd, 2021 daily chart
Bullish Spinning Top Candlestick Pattern on the Enphase Energy (ENPH) November 3rd, 2021 daily chart

The following are the requirements for a valid bullish spinning top:

  • A small bullish body with shadows longer than its real body.

The trend doesn’t matter. The bullish spinning top appeared on the EnPhase (ENPH) November 3rd, 2021, daily chart.

We see a small-bodied green candle with wicks longer than its body.

Now that we know how to identify this single candlestick, let’s learn the best bullish spinning top trading strategy.

How to Trade the Bullish Spinning Top Candlestick Pattern

The bullish spinning top candlestick pattern is best traded using a bullish mean reversion strategy in the crypto and stock markets and a bearish mean reversion in the forex markets, according to our 21-year backtest.

Traditional technical analysis considers this indecision, so we don’t need to cover conventional trading strategies. Instead, let’s jump to the optimal bullish spinning top trading strategy.

Bullish Spinning Top Bullish Mean Reversion Trade Setup

Bullish Spinning Top Bullish Mean Reversion Trade Setup on the Microsoft (MSFT) November 17th, 2021 daily chart
Bullish Spinning Top Bullish Mean Reversion Trade Setup on the Microsoft (MSFT) November 17th, 2021 daily chart

Identifying bullish spinning top candles is straightforward. We only need a single green bar whose body is smaller than both wicks. We don’t need to worry about the trend.

We see the bullish spinning top pattern on the Microsoft November 17th, 2021, daily chart.

Data-driven stock and crypto traders go long when prices cross below the candle’s low and come back above that low, setting a stop loss of one ATR.

To make this lucid, the low of the candle is $338. Prices cross below the low and back above $338 the next day, triggering an entry.

And we see that trading this spinning top candle using bullish mean reversion was profitable for this stock trader. But what about forex traders?

They should also expect volatility, just in the other direction.

Bullish Spinning Top Bearish Mean Reversion Trade Setup

Bullish Spinning Top Bearish Mean Reversion Trade Setup on the Ethereum (ETHUSD) October 7th, 2021 daily chart
Bullish Spinning Top Bearish Mean Reversion Trade Setup on the Ethereum (ETHUSD) October 7th, 2021 daily chart

With shadows larger than the green real body, we see another bullish spinning top.

A savvy forex trader will enter short after the price pushes up and comes back below the candlestick’s high, setting a stop loss of one ATR.

Let’s make this crystal using the Ethereum chart above.

The spinning top candlestick appeared on October 7th, 2021. The price pushes above the $3,655.02 high and comes back below it the next day, triggering an entry. This bearish reversal signal does catch a bearish trend and turns profitable for this trader depending upon the risk-reward selected.

Speaking of trading profits, how have these bullish spinning top trading strategies performed across the crypto, forex, and stock markets historically?

Does the Bullish Spinning Top Candlestick Pattern Work? (Backtest Results)

I backtested the bullish spinning top candlestick patterns on the daily timeframe in the crypto, forex, and stock markets using the following rules:

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Multiple candlestick patterns are often confused with the bullish spinning top when practicing candlestick technical analysis.

Bearish Spinning Top vs. Bullish Spinning Top

Bearish Spinning Top Candlestick Pattern Illustration © Analyzing Alpha
Bearish Spinning Top Candlestick Pattern Illustration

The bearish spinning top is the exact opposite of its bullish brethren. The bearish spinning top is a single candlestick whose body is smaller than its wicks that doesn’t require a trend. 

The candle color is the only difference between the bearish and bullish spinning top.

Both are considered indecision candlesticks, yet the backtests show that they forecast future volatility.

Doji vs. Bullish Spinning Top

Common Doji Candlestick Pattern Illustration © Analyzing Alpha
Common Doji Candlestick Pattern Illustration

A doji is a candle whose close and open are nearly identical that doesn’t require a trend. And while there are many types of doji, the primary difference between the doji and bullish spinning top is that the spinning top has a larger real body than a doji.

Bullish High Wave vs. Bullish Spinning Top

Bullish High Wave Candlestick Pattern Illustration © Analyzing Alpha
Bullish High Wave Candlestick Pattern Illustration

The high wave candlestick pattern and bullish spinning top are almost identical. The only difference between the bullish high wave and the bullish spinning top is that the high wave has longer upper and lower shadows. A good rule of thumb is that any candle whose wicks are 3x larger than its real body is a high-wave, not a bullish spinning top.

Shooting Star vs. Bullish Spinning Top

Shooting Star Candlestick Pattern Illustration © Analyzing Alpha
Shooting Star Candlestick Pattern Illustration

The shooting star candlestick pattern is somewhat similar to the bullish spinning top. Like the bullish spinning top, the shooting star is a one-bar candle. Unlikely its spinning friend, it only occurs in an uptrend and requires little to no lower shadow and a long upper shadow.

The Bottom Line

The bullish spinning top is a one-bar pattern that most market participants believe represents indecision. According to our backtests, these single-bar candles represent likely future volatility.

According to history, the best trading strategy for the bullish spinning top is to expect this volatility and use a bullish mean reversion strategy in the crypto and stock markets and a bearish mean reversion strategy in the forex markets.

If you enjoyed this article, check out the backtest results and learn the highest probability candlestick patterns.

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