| Welcome
to the Candlestick Introduction section of TheRicePaper.com
web site. If you are new to Candlesticks, This section
will begin to teach you what they are and what they
can do for you. Well, If you are ready, let's get started...
Japanese
Candlesticks were created over 300 years ago to aid
a trader in predicting the future price of "Rice
Bushels" in Osaka, Japan. This gentleman's name
is Mr. Sokoyu Homma. He began the Japanese candlestick
trading technique to assist him in tracking the prices
for items that were being traded in the local "Barter
Market". His intent, of course, to gain an advantage
over the others trading and bartering for goods and
services.\
Mr.
Homma eventually became a very wealthy man - as the
story is told - and the local people actually wrote
songs about him and his prowess in trading and making
profits. Mr. Homma's original work details the "Sakata's
Five Methods", the "Sakata's Constitution"
and the "Market's Sanmi no Den" which represent
the foundation of Japanese Candlesticks. We will teach
you about these fundamental Candlestick basics as well
as the groups of patterns that make up the "Sakata's
Five Methods".
The
Sakata's Constitution consists of a series of simple
rules by which to trade. These rules, in a broader term,
can be applied today to the markets for profitable trading.
Although created hundreds of years ago, the underlying
moral of each rule is to know one's limit and to attempt
to prevent failure. Take a look at the "Sakata's
Constitution" below...
1.
Without being greedy, think about the time and price
ratio by looking at past price movements.
In
other words, study the past price movements over time
in an attempt to become a better and more objective
trader.
2.
Attempt to sell at the top and buy at the bottom.
This
one seems pretty simple in principle, but tough to execute.
3.
One should increate one's positions after a rise of
100 bags from the bottom or a fall of 100 bags from
the top.
In
other words, add to a profitable position after a specified
price move or percentage move has been achieved. This
rule attempts to provide a "compounding",
or scale trading, to the candlestick technique.
4.
If one forecasts the market incorrectly, one should
attempt to identify the error as soon as possible. As
soon as the error is discovered, one should liquidate
one's positions and rest on the side for forty to 50
days.
If
this wre only the rule we could all follow. This one
simply states "if you take a loss, exit the trade
and stay out of the market untill you can identify the
emotional, physical or technical inpulse that got you
into the trade. Remember hind-sight is always 20/20!
5.
One should liquidate seventy to 80 percent of one's
profitable positions, liquidating the remainder after
changing directions once the price has reached its ceiling
or bottom.
In
other words, if you feel concerned about a current market
position and are considering exiting the trade, liquidate
seventy to 80 percent of the trade and then wait to
confirm the market reversal before actually liquidating
the remainder.
Do
you understand this so far? I hope so because here we
go the the next portion...
CONTINUE
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