Munehisa Homma: Creator of Candlestick Charts
If you are a trader then you should have heard his name at least once. Munehisa Homma or better known as Sokyu Homma/ Sokyu Honma was the most successful Japanese trader of his time. His name is still famous even today. His name lasted for centuries because of his work creating charts that are still used by traders around the world.
Table of Contents
The Candlestick Chart.
Munehisa Homma is a famous rice merchant from Sakata, Japan. When his father died, he replaced his father’s position to manage his father’s inheritance.
In the late 1600s, the Japanese government established a commodity exchange in Osaka due to the booming agricultural and trade sectors at the time. The most traded commodity at that time was rice. Traders began to make transactions on the commodity exchange.
Along with its development, in 1710 the rice commodity exchange began to implement a rice warehouse memorandum system. This rice note became the first futures contract ever traded.
Since then, Munehisa Homma began to continue trading on the rice commodity exchange and started trading rice futures contracts and this is where his success in the trading world began.
He is said to have made about $10 billion in trading in the Japanese rice market at that time. Thanks to his skill in analyzing the market, he also made a profit from trading 100 times in a row.
The Beginning of the Candlestick
Every day, Munehisa Honma records the movement of rice prices on a piece of paper. He drew a pattern of rice prices in the form of blocks on paper made from rice plants. Recording the opening price, highest price, lowest price, and closing price. This pattern is what he calls a candlestick chart. And this chart is still used by traders around the world.
For a Munehisa Homma, candlestick patterns are very useful for determining the direction of rice price movements. At that time, this idea started to spread and many other traders used the candlestick idea.
Since then, he has started to give names to certain price patterns such as dozie, harami, marubozu, and others. To this day, his centuries-old ideas are still used around the world, not only in the commodity markets, but also in the stock, futures, and forex markets.
In addition, to get information on price movements quickly, he is reported to have a network of informants spread across the area between Sakata and Osaka, which is 600 kilometers away.
Munehisa Homma’s Other Works
His analytical and predictive abilities were very reliable in trading, making Munehisa Homma appointed as a financial advisor to the Japanese government and received the honorary title of samurai at that time.
Apart from making candlestick charts, he also shares his knowledge by writing books. His most famous books include ‘The Fountain of Gold – The Three Monkey Record of Money and Sakata Rules.
In both of his books, he explains the psychology of trading or controlling trading emotions that can affect the success factors in trading. He also explains about candlestick chart patterns that he made in his book.
And that’s the story of the legend of the candlestick creator. Homma has left a very useful and timeless knowledge to this day.
