A contemporary guide to the ancient investment techniques of the far East.

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Writer said
till 1989 the claws Of Japanese technical analysis were unknown to western world.

He proudly said that Japanese Candlestick charting Techniques is the foundation of all candlestick charting work in the west. further he disclaim that ‘ I can’t guarantee “big $$$” I expect that the tools strategies & techniques in this book will go a long way to improve your trading & decrease risk exposure.’

CHAPTER 1 – INTRODUCTION

The beginning is most important

Why Candlestick Charting Techniques Capture Attention Worldwide

The interest in candlestick charting techniques grows year after year. This is due to several reasons:

1. Ease of Understanding: They are simple and intuitive.
2. Early Market Indications: They provide earlier signals of market turns.
3. Unique Market Insights: They furnish unique insights into market health.
4. Enhanced Western Analysis: They complement and enhance Western charting methods.
5. Increased Efficiency: They improve the overall efficiency of market analysis.

This chapter is the first step in the thousand-mile journey of candlestick chart analysis.

Advantages of Candlestick Charts Over Bar Charts

Using candlestick charts over bar charts is beneficial because:

• Unique Signals: Candlestick charts provide signals not available with bar charts.
• Market Health Insights: They offer insights into the market’s health that are unavailable elsewhere.

Who Is This Book For?

This book is designed for:

1. Improving Market Timing: Those who want to enter and exit markets with better timing.
2. Complementing Existing Tools: Traders looking for additional techniques to enhance their current tools.
3. Learning with Fun: Individuals who enjoy learning through engaging methods.
4. All Levels of Experience: Both newcomers to candlestick charts and experienced traders.

The idea of this book is to show how Japanese candlestick techniques can “enlighten” your trading. As the Japanese say, “One seeing is better than a hundred hearing.”

Applications of Candlestick Charts

Candlestick charts can be used across various trading timelines and markets:

• Weekly Charts: Ideal for hedgers.
• Daily Charts: Suitable for swing and intermediate-term traders.
• Intraday Charts: Perfect for swing and day traders.

The strategies discussed in this book apply to a wide range of financial instruments, including equities, futures, options, and foreign exchange.

Chapter 2 – A Historical Background

Introduction to Munehisa Homma and His Era

Munehisa Homma, often celebrated as the “god of the market,” was a pioneering figure in the use of past prices to predict future price movements. His work laid the foundation for the candlestick charting techniques used in modern trading. Homma was born in 1724 into a wealthy family and took over the family business in 1750. His methods and strategies were deeply influenced by the historical and economic context of Japan during his lifetime.

The Historical Context: Age of County Wars and Unification

Between 1500 and 1600, Japan experienced a period known as the Age of County Wars, during which the country was divided into 60 provinces. This era of conflict culminated in the unification efforts of three powerful leaders: Nobunaga Oda, Hideyoshi Toyotomi, and Ieyasu Tokugawa. By the early 1600s, Japan was unified under General Tokugawa’s family, who ruled from 1615 to 1867.

The Role of Trading in Feudal Japan

Trading in Japan during this era required skills similar to those used in warfare, such as strategy, psychology, competition, and strategic withdrawals, with an element of luck. This period saw the development of several battlefield-inspired terminologies in trading, such as the Three Soldiers pattern, counterattack lines, and gravestone doji.

Economic Growth and Market Development

The 17th century marked significant economic growth and the expansion of domestic trade in Japan. The emergence of a national market began to replace local and isolated markets. Hideyoshi Toyotomi regarded Osaka as Japan’s capital, which later became the greatest marketplace. Osaka’s culture was deeply influenced by the pursuit of profit, a sentiment still reflected in the traditional greeting “Mokanimakka,” meaning “are you making profit?”

Yodoya Keian, a prominent war merchant for Hideyoshi, played a crucial role in this economic landscape. Yodoya’s expertise in transporting, distributing, and setting the price of rice led to the development of the first rice exchange in his front yard, which was later institutionalized by the Dojima Rice Exchange established in 1600 in Osaka. After 1710, the rice exchange began issuing and accepting rice warehouse receipts, known as rice coupons, which became the first futures contracts ever traded. Rice effectively became the de facto medium of exchange.

Munehisa Homma’s Contributions to Trading

Against this backdrop, Munehisa Homma began his career. Taking over the family business after his father’s death, Homma moved to Osaka to trade rice futures at the Dojima Rice Market. He meticulously gathered information on rice markets, including yearly weather conditions and historical rice prices. Homma also set up a communication system involving men on rooftops using flags to send signals at prearranged times.

Homma’s dominance in the Osaka market eventually led him to Edo (now Tokyo), where he became a financial consultant to the government and was honored as a samurai. He passed away in 1803. Homma’s trading principles, documented in his works “Sakata Senho” and “Soba Sani No Den,” His trading principle used in rice market evolved into the candlestick methodology still used in Japanese trading today.

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