The Spinning Top & Momentum Strategy is a powerful candlestick-based trading method that combines price indecision signals with momentum confirmation to capture trend continuation or early reversal entries. The spinning top candlestick reveals market hesitation, while momentum indicators such as RSI, MACD, or stochastic oscillators confirm whether that indecision is likely to resolve into a strong move.

This strategy is ideal for traders looking to improve timing on entries and exits, especially in volatile or trending markets.

What Is a Spinning Top Candle?

A spinning top is a candlestick with a small real body and long upper and lower shadows, indicating market indecision between bulls and bears.

Key characteristics:

• Small real body (open and close are close together)
• Long wicks on both ends
• Appears after strong moves or at key support/resistance zones
• Often signals potential pause, reversal, or continuation

Strategy Objective

• Identify indecision in the market at a key level
• Use momentum indicators to confirm likely direction
• Enter with improved risk-to-reward and reduced false signals

Indicators Used

• Candlestick chart (for spinning top detection)
• Relative Strength Index (RSI) or Stochastic (for overbought/oversold and divergence)
• MACD or Momentum Oscillator (for trend strength and confirmation)
• Optional: Volume or ATR for volatility context

Strategy Setup: Trend Continuation Scenario

1. Identify prevailing trend: Use EMA (e.g., 20-period) to define trend direction
2. Spot a spinning top: Appears during a pullback within the trend
3. Check momentum:
   • RSI above 50 in uptrend or below 50 in downtrend
   • MACD lines above zero in uptrend, below zero in downtrend
4. Entry:
   • Enter on break of spinning top candle in direction of trend
   • Confirm with increasing volume or strong follow-up candle
5. Stop Loss:
   • Below/above the low/high of the spinning top wick
6. Take Profit:
   • Previous swing high/low or 1.5–2x risk reward

Example:

• EUR/USD is in an uptrend
• Spinning top forms at 20 EMA support
• RSI at 56, MACD sloping upward
• Enter long on candle break above high of spinning top

Strategy Setup: Reversal Scenario

1. Strong trend exhaustion zone (e.g., after 5+ trending candles)
2. Spinning top appears at major resistance or support
3. Momentum divergence:
   • RSI divergence or MACD histogram weakening
4. Entry:
   • Enter on break of spinning top in reversal direction
5. Stop Loss:
   • Past wick of spinning top
6. Target:
   • First pullback or swing point in opposite direction

Example:

• GBP/USD has rallied sharply
• Spinning top forms at daily resistance
• RSI divergence visible
• Short entry on candle break below low

Best Markets and Timeframes

• Major forex pairs (EUR/USD, GBP/USD, USD/JPY)
• Gold, crude oil, indices (NAS100, SPX500)
• Timeframes: M15, H1, H4 for intraday; D1 for swing trades

Tips for Optimising This Strategy

• Avoid trading spinning tops in sideways markets
• Look for clean candle structure—no overlapping bars
• Combine with trendline, moving average, or supply/demand confluence
• Volume spikes or ATR expansion can enhance signal validity

Advantages of the Strategy

• Combines price action with technical confirmation
• Improves entry timing on trends and reversals
• Works across assets and timeframes
• Low-risk entries with defined candle-based stops

Limitations

• Requires context: spinning tops alone are not trade signals
• Whipsaw risk in low-volume or choppy sessions
• Needs discipline to wait for momentum confirmation

Conclusion

The Spinning Top & Momentum Strategy is a reliable and adaptable trading method that blends classic candlestick analysis with momentum confirmation to filter high-probability entries. Whether you’re trading trend continuations or spotting early reversals, this strategy offers a structured approach to engage the market with confidence.

To learn how to master candlestick and momentum-based trading with professional setups, entries, and exit management, enrol in our Trading Courses and take your price action skills to the next level.