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Basics of Forex Candlestick charts 3


Spinning top

Candlesticks with long upper and lower shadow that has small real body are called spinning top patterns, which represents indecision of the traders. The small real body means little movement from open and close and the long shadows shows active struggle between buyers and sellers trying to gain upper hand, but resulted in standoff where neither gained anything. If spinning top appeared after a long upper trend, it indicates many buyers left the market and the market can lean toward downward direction, and after a long decline, a spinning top can mean potential rise, because large amount of sellers has left the market.

Since spinning top signifies a possibility of change in trend, it must be confirmed by sideway movements afterward. The next candle following a spinning top should confirm; if the spinning top occurs within a range, it confirms the current indecision of the market, and the price will continue to head sideways; if the spinning top occurs after a decline or advancement and followed by a candle with same direction, it also means sideway movements; if the spinning top occurs after a uptrend and followed by price drop, it means the start of reverse.


A candlestick without any upper or lower body is called marubozu, which means the market has solid strong upward or downward movement throughout the day and closed at its high or low price. Such pattern has a characteristic of huge opening and closing price difference; bullish marubozu means starting low and ending high, while bearish marubozu means starting high and ending low.


Doji candlestick pattern means same opening and closing price illustrated with short or thin body of candle as thin as a line. Doji signifies that both sellers and buyers were passive and neither of them dominated the market, thus resulted in indecision of making any position.

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