One of the legendary figures who contributed to shaping the trading world as we see it today, Munehisa Homma is popularly known as the ‘Father of Price Action Trading’ because he invented the use of candlestick charts as a method to find trading opportunities.
He was one of the greatest traders in the history of financial markets and there is a lot to learn from his life and work.
Let us try to learn more about this legend and his contributions to the trading landscape.
Munehisa Homma – A Complete Guide
Munehisa Homma or Sokyu Homma, who lived from 1724 to 1803, was originally a rice merchant from Sakata, Japan who became an expert in rice futures at the Dojima Rice Exchange in the 18th century.
According to stories, Homma had a network of men spaced at 6 km between Osaka and Sakata for the expedition of market price communication.
This suggests that he realized the impact of speedy, reliable market data on trading decisions.
One of the biggest factors contributing to Homma’s success was a system devised by him for identifying repeated patterns and trends in pricing.
He used to draw price patterns on rice parchment paper to record the low, high, open, and close for each day.
He started giving names to these patterns and signals, some of which are prevalent today as Japanese candlestick patterns.
He used them to predict the direction of rice futures.
This capability along with his skill and passion for trading gave him an advantage over others, making him one of the most successful traders ever.
The method Munehisa Homma used for plotting rice price action is today known as the ‘candlestick’ chart trading which has remained so effective and popular over the centuries.
Homma based his trade on market price movement and was the first trader to realize the importance of focusing on price action to predict the direction.
His skills and success got him the position of financial advisor at the Japanese government and he was later awarded the title of honorary Samurai.
Munehisa Homma Net Worth
Munehisa Homma was one of the most successful futures traders ever in history and managed to amass huge profits from his trades.
It is believed that he earned $10 billion equivalent of today by trading in the Japanese rice markets.
While his exact net worth is not known, estimates suggest his total earning from trading was about $100 billion worth today’s US currency.
Munehisa Homma was born rich to a rice merchant.
Apart from his rice business and trading, much of his net worth comes from his books on financial markets and trading.
However, it was his immense success in the futures that made him one of the richest traders in history.
Stories say he once had 100 profitable trades in a row.
It is easy to imagine the advantage he enjoyed being the discoverer of technical analysis.
Munehisa Homma Trading Strategy
A big reason behind Homma’s phenomenal success was his ability to link the market movement with trader psychology.
He was the first trader to realize that the psychological aspect of the market is critical to trading success and that trader emotions influence prices significantly.
He identified that price moved because traders acted on emotions of greed and fear and not on the logical thought process.
He created his powerful trading system with the use of this knowledge.
While other traders did not track prices, Homma was plotting everyday price data to create ‘candlesticks’ and realized that patterns repeated when the price was near reversal attributing to trader psychology and behaviour in similar situations.
Munehisa Homma built a system on price information to find and create price action patterns over time and used them to make profitable trades.
Homma also studied the price information of the past 100 years to find more patterns. He named different market patterns and rules he created and used.
These rules are today popular by the name ‘Sakata Rules’. He termed the bull market as ‘Yin’ and the bear market as ‘Yang’ and outlined the concepts of interrelationship and rotation between these.
He also gave the notion of what we know as a swing point today where most traders enter the trade.
Munehisa Homma Books
Munehisa Homma has written multiple books on technical analysis and trading methods.
In 1755, he wrote the book ‘The Fountain of Gold – The Three Monkey Records of Money’ which was the first ever to discuss market psychology.
In this book, he addressed several trading topics which are popular to date.
He discussed his trading strategies in this book and explained how trader emotions and psychology influence market prices.
In his books, he discussed the concepts of bullish and bearish trends and explained how one can use market psychology and price patterns to make profitable trading decisions.
Homma wrote several books on technical analysis, futures trading, and candlestick trading.
While most of them are out of print today, the candlestick chart patterns he introduced through his books form the basis of modern candlestick charting.
Most concepts he wrote have remained relevant throughout the centuries.
Today, you can find several books written by different authors on Munehisa Homma, his life, and trading strategies to help enthusiasts get started and learn powerful trading strategies to make profits.
The Candlestick Trading Bible
The Candlestick Trading Bible is a powerful trading system introduced by Munehisa Homma.
The method is based on the Japanese candlestick patterns combined with technical analysis to help create profitable trades.
Japanese candlesticks are a critical aspect of financial markets.
You must learn how to read charts to be able to identify signals and make the right decision at the right time.
The book ‘The Candlestick Trading Bible’ by Sanyog Raut is compiled to provide an easy version of this trading method introduced by the most successful trader of all time.
This book should help beginners and intermediate traders learn the ins and outs of this effective trading method and understand how it can be used to trade any financial market for maximum profits.
A trader like Munehisa Homma who could make billions in his lifetime using his trading skills and strategies must know how the market behaves and how to capitalize on it.
While Homma’s trading methods were completely different from today’s, there is a lot of modern traders who can learn from his style.
Traders and investors owe so much to the insights and contributions of the legend. He was a pioneer and visionary who enlightened the trading world with concepts that still work.