Here we will look at the origins of this method of charting and there rise in popularity and the story begins back in the 1600s at the world's first futures exchange in Osaka.

Trading In rice and the Worlds first Futures Exchange

The Dojima Rice Exchange was set up in the late 1600s in Osaka which was the capital of Japan at the time and its commercial hub. At the exchange merchants graded the rice and set its price. Up until 1710, the Exchange the deals were all done on physical rice but the method was changed whereby the exchange accepted rice warehouse receipts and this makes the Dojima exchange the first ever futures exchange in the world to trade in forward contracts.

God of the Markets Muneshisa Homma

The legendary Munehisa Homma, was seen as the first great candlestick chartist and he made a fortune trading in the rice market using candlestick techniques. He was born in 1724 into a one of the richest families in Japan and they were so rich there was a saying about them:

"I will never become a Homma, but I would settle to be a local lord."

Munehisa Homma took over the family business in 1750, he began trading at his local rice exchange in the port city of Sakata. Sakata which was a major trading hub for both collection and distribution throughout Japan.

Homma's Trading Techniques and Results

Homma's family had one of the biggest rice farms in Japan and much of the information about Rice fundamentals was usually available to them. Homma also keep detailed records and statistics such as yearly weather conditions and studied the price going back over a number of years to gain more insight into how rice prices fluctuated. Homma also set up his own communications system. At prearranged times he placed men on rooftops to send signals by flags. These men stretched the distance from the Dojima Rice exchange in Osaka to. His base in Sakata.

After becoming hugely successful on the Osaka markets, Homma went to trade in the regional exchange at Edo. He used his candlestick trading techniques to make a huge fortune and it was also said he managed to have a run of a 100 consecutive winning trades.

Homma's Later Years

Homma later after retiring from trading became a economic advisor to the government and was given the title of samurai. His books about the markets and trading them - Sakata Senho and Soba Sani No Den, were written in the 1700s and he is credited as being the first Japanese technical trader and his techniques evolved into the Candlestick method of charting we all know today.

Japanese Candlestick Charting there Rise in Popularity in the West

The Japanese Chart of Charts by Seiki Shimizu which was translated by Greg Nicholson and published by the Tokyo Futures Trading Publishing Co achieved cult status among many western chartists when it became one of the first books to be published in English. The rise of the Japanese finance industry in the late eighties and nineties, saw many Japanese banks expand in the USA and London and they were using candlestick charts and many f the local traders wanted to learn more about them and this book became popular but the book which really achieved huge popularity was written by Steve Nison. 

Nison published the book "Japanese Candlestick Charting Techniques", in 1991 and the book became an immediate best seller and is still very popular today and is seen, as the definitive introduction to candlestick charts. At the time he predicted that candlestick charting would become the most popular form of chart analysis and today – they are the most popular form of charting for Forex traders.

The Oldest and Most Popular Method of Charting

Why are they so popular? There fun to use, easy to learn and give a deep insight into market psychology and also, with the rise of the internet and powerful software packages, there drawn instantly so the trader can see the formations and use them in their trading strategies. Candlestick charts are the oldest form of charting but they are more popular today, than ever with traders in all markets, not just Forex. All traders should study them and make them, part of their currency trading education.