Detecting Spinning Top Candlestick Pattern in Pine Script

Overview of Spinning Top Candlestick Pattern

The Spinning Top candlestick pattern is a significant formation in technical analysis, symbolizing a state of indecision in the market. It is characterized by its unique structure, which provides insights into market sentiment and potential future price movements. Here are the key features and implications of the Spinning Top pattern:

Appearance and Structure

• Structure: A small real body, indicating little difference between the opening and closing prices, flanked by long upper and lower shadows.
• Indication of Indecision: The pattern suggests a balance between buyers and sellers, with neither gaining control.
• Contextual Importance: Its significance varies with market trends. In an uptrend, it may signal a potential bearish reversal, and in a downtrend, a potential bullish reversal.
• Color Variations: A green or white body suggests slight bullishness, while a red or black body hints at mild bearishness.
• Use in Trading: Traders often combine the Spinning Top with other indicators to confirm trend reversals or continuations.

Importance in Technical Analysis

The Spinning Top candlestick pattern holds significant importance in technical analysis due to its ability to signal potential changes in market sentiment and direction. Here are some key aspects of its importance:

1. Balance of Power: The Spinning Top’s small real body, flanked by long upper and lower shadows, indicates a tug-of-war between buyers and sellers, with neither side gaining significant ground. This balance suggests market indecision.
2. Precursor to Reversals: In certain contexts, it can foreshadow a potential reversal in the existing trend, especially if it appears after a prolonged price move.
3. Versatile Signal: The pattern is considered versatile as it can be identified in various market conditions – uptrends, downtrends, or sideways markets.
4. Confirmatory Tool: Its significance is amplified when it appears near key support or resistance levels or in conjunction with other technical indicators.
5. Combination with Other Indicators: For greater accuracy, analysts often use the Spinning Top in conjunction with other technical tools like moving averages, RSI (Relative Strength Index), or MACD (Moving Average Convergence Divergence).

Example From Trading View Chart

Defining the Spinning Top Candlestick Pattern Criteria

• Small Real Body: The real body should be small compared to the total range of the candle. This is typically defined as a percentage of the total candle range.
• Long Shadows: Both the upper and lower shadows should be significantly longer than the real body. This can also be defined as a percentage of the total candle range.
• Total Candle Range: This is the difference between the high and the low of the candle.

Code For Detecting Spinning Top

//@version=5
indicator("Spinning Top Detector", overlay=true)

// Parameters for defining a 'small' body and shadow tolerance
bodyThreshold = input(0.1, title="Max Body Size as % of Candle Range")
shadowTolerance = input(0.1, title="Shadow Length Tolerance as % of Candle Range")

// Calculate the candle components
upperShadow = high - math.max(open, close)
lowerShadow = math.min(open, close) - low
bodySize = math.abs(close - open)
candleRange = high - low

// Define the central body criteria
isBodySmall = bodySize <= candleRange * bodyThreshold
isBodyCentered = math.abs(upperShadow - lowerShadow) <= candleRange * shadowTolerance

// Define bearish and bullish Spinning Top criteria
isBearishSpinningTop = isBodySmall and isBodyCentered and close < open and upperShadow > bodySize and lowerShadow > bodySize
isBullishSpinningTop = isBodySmall and isBodyCentered and close > open and upperShadow > bodySize and lowerShadow > bodySize

// Plotting the patterns on the chart using labels
if (isBearishSpinningTop)
    label.new(bar_index, high, "Bearish Spinning Top", style=label.style_label_down, color=color.red, textcolor=color.white,yloc =yloc.abovebar)

if (isBullishSpinningTop)
    label.new(bar_index, high, "Bullish Spinning Top", style=label.style_label_down, color=color.green, textcolor=color.white,yloc = yloc.abovebar)

Output

Overview of the script 

1. Script Declaration

//@version=5
indicator("Spinning Top Detector", overlay=true)

• //@version=5: Specifies the version of Pine Script used, which is version 5 in this case. It’s the latest version with the most up-to-date features and syntax.
• indicator("Spinning Top Detector", overlay=true): Declares a new indicator named “Spinning Top Detector”. The overlay=true parameter ensures that the indicator is drawn over the main price chart.

2. Input Parameters

bodyThreshold = input(0.1, title="Max Body Size as % of Candle Range")
shadowTolerance = input(0.1, title="Shadow Length Tolerance as % of Candle Range")

• bodyThreshold = input(0.1, title="Max Body Size as % of Candle Range"): This line sets an input for the maximum size of the candle body as a percentage of the total candle range, defaulting to 10% (0.1).
• shadowTolerance = input(0.1, title="Shadow Length Tolerance as % of Candle Range"): Sets an input for the tolerance in the length difference between the upper and lower shadows, also defaults to 10%.

3. Candle Component Calculations

upperShadow = high - math.max(open, close)
lowerShadow = math.min(open, close) - low
bodySize = math.abs(close - open)
candleRange = high - low

• upperShadow, lowerShadow, bodySize, candleRange: These lines calculate the key components of each candlestick – the upper shadow, lower shadow, the size of the body, and the total range of the candle.

4. Criteria for Central Body

isBearishSpinningTop = isBodySmall and isBodyCentered and close < open and upperShadow > bodySize and lowerShadow > bodySize
isBullishSpinningTop = isBodySmall and isBodyCentered and close > open and upperShadow > bodySize and lowerShadow > bodySize

• isBearishSpinningTop: Checks for a bearish Spinning Top, where the candle’s closing price is lower than its opening price, along with the conditions of a small, centered body and significant shadows.
• isBullishSpinningTop: Similar to the bearish condition, but checks for a bullish Spinning Top where the closing price is higher than the opening price.

5. Criteria for Spinning Tops

isBearishSpinningTop = isBodySmall and isBodyCentered and close < open and upperShadow > bodySize and lowerShadow > bodySize
isBullishSpinningTop = isBodySmall and isBodyCentered and close > open and upperShadow > bodySize and lowerShadow > bodySize

• isBearishSpinningTop: Checks for a bearish Spinning Top, where the candle’s closing price is lower than its opening price, along with the conditions of a small, centered body and significant shadows.
• isBullishSpinningTop: Similar to the bearish condition, but checks for a bullish Spinning Top where the closing price is higher than the opening price.

6. Label Plotting

if (isBearishSpinningTop)
    label.new(bar_index, high, "Bearish Spinning Top", style=label.style_label_down, color=color.red, textcolor=color.white,yloc =yloc.abovebar)

if (isBullishSpinningTop)
    label.new(bar_index, high, "Bullish Spinning Top", style=label.style_label_down, color=color.green, textcolor=color.white,yloc = yloc.abovebar)

• The if statements check if either the bearish or bullish Spinning Top conditions are met for each candle.
• label.new(...): Creates new labels on the chart. For a bearish Spinning Top, the label is red and located above the bar. For a bullish Spinning Top, the label is green and also placed above the bar. The style=label.style_label_down ensures the labels point downwards for visibility.

Frequently Asked Questions

Conclusion

In conclusion, the “Spinning Top Detector” script is a valuable tool for traders and analysts using technical analysis. By effectively identifying and differentiating between bearish and bullish Spinning Top patterns, it provides crucial insights into market indecision points. Its customizable parameters allow users to tailor the detection criteria to their specific trading strategy and market conditions. The use of labels enhances the visibility and clarity of these patterns on the chart, making it a user-friendly and efficient tool for traders of all levels. Whether applied to short-term trading or long-term investment analysis, this script stands as a versatile and insightful addition to any trader’s toolkit, aiding in the decision-making process by highlighting potential trend reversals or continuations in various financial markets.