Candlestick Charting: Legend of Munehisa Homma
Among the legendary figures who shaped the trading world is Munehisa Homma, known in his time as the “god of the markets.”
Originally a rice merchant from Sakata, Japan, Munehisa Homma became an expert rice futures trader at the Dojima Rice Exchange in the 18th century. He was widely known among fellow traders for his success and earned the nickname “the god of the markets” while accumulating a rumored net worth of $100 billion in today’s US currency.
Father of Candlestick Charting
Established in 1697, the Dojima Rice Exchange of Osaka was the world’s first formal futures exchange. Although only physical rice was initially traded, in 1710 storage houses began issuing “empty rice coupons” for future delivery of rice. And with that, futures trading was born.
One of the keys to Homma’s success was a system he devised which identified repeating patterns and trends in rice commodities pricing. His method of plotting price action on a trading chart is known today as the “candlestick.”
Homma’s unique approach provided a clear visual display of multiple data points including the open, high, low and close price within a given period of time.
Homma also purportedly organized a network of men spaced every 6 km between Sakata and Osaka to expedite the communication of market prices. Clearly ahead of his time, he recognized the impact fast and reliable market data made on trading decisions!
Renowned for his success, Homma was eventually recruited as a financial advisor to the Tokugawa Shogunate, the Japanese government at the time, and was awarded the title of honorary Samurai.
Yin and Yang
In 1755, Homma wrote The Fountain of Gold — The Three Monkey Record of Money. His book addressed many of today’s popular trading topics including a discussion on market psychology which emphasized the relationship between emotion and price activity.
Homma’s observations would later become the basis for Japanese investing philosophy. He termed a bull market “Yin” and a bear market “Yang,” and detailed the interconnected relationship and rotation — “when all are bearish, there is cause for prices to rise.”
Regardless of trading approach, modern-day traders and investors owe much to the discoveries and insights of Munehisa Homma. A pioneer and visionary, he enlightened the trading world with concepts still utilized today.
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