CandleLight to the Futures

The Beginning

The method of predicting price movements by looking at the previous day's movement was first developed by Sokyu Homma. This method was later termed the "Sakata Constitution". In the 1700's, Homma lived near the "shonai" (rice) distribution center where he began trading at his local rice exchange. He was far more successful than others. But he kept his ideas secret. He was eventually promoted to the "bushi" (samurai) level and moved to Edo where he began to trade at the Edo (Tokyo) Regional Exchange. He used his secret methods to amass a huge fortune. Homma probably charted as a matter of expediency inasmuch as he found it necessary to see the highest and lowest price movements at a glance. If someone asked him how the rice market was doing he didn't need all the information gathered from various rice paddies.
He used a line called the "anchor line", as shown to the right.
Notice the arrow changes in the example when the closing price is high and when the closing price is low.
After much trial and error, the candlestick line was created to show the highs and the lows of the day, as well as the open and the close, with the color of the candle giving the move or direction.
The following "secrets" evolved into the "Sakata Constitution":

Without being greedy, think about the time and price ratio, by looking at past price movements.
Aim at selling at the ceiling and buying at the bottom.
One should increase one's position after a rise of 100 bags, or a fall of 100 bags from the top.
If one forecasts incorrectly, one should correct the mistake as soon as possible and rest on the side for 40 to 50 days.
One should liquidate 70 to 80% of one's profitable position, liquidating the remainder, and changing directions once the price has reached its ceiling or bottom.
In spite of the fact that these trading rules are well over two hundred and fifty years old, they are still applicable to today's markets.

The futures trader who seeks to succeed must learn how to read the message of the charts, just as the cat senses the direction of the mouse's movement.
Charts are the greatest weapon a trader has for determining future market direction.
The lines (candles), on the following page, have been named the “Sakata method”.

Why Candlesticks?

Here are some of the reasons for our preference:

Candlesticks give you much more information each day than do
traditional bar charts. While traditional bar charts show you the open, high, low and close of each day, they do not readily make the relationship between these four important variables apparent. Candlesticks give you this information immediately upon visual inspection
While traditional bar charts can also be used analytically to give you
specific patterns and formations, there are many more candle patterns than there are bar chart patterns. And, each candle pattern is based upon many years of study and analysis by traders in the Far East.
Candlesticks can be used not only for position trading but they also
identify support and resistance which may be used once a trend has been
established. This allows short term traders to use candle formations.
Candlestick patterns can also be used for day-trading provided you have learned how to effectively recognize the necessary candle formations.
The most important thing to remember about candles is that they are not a mechanical method of trading. Candles allow you, the trader, to use your skill and insight in order to achieve profitable results.

While no system, method or indicator can guarantee success in futures trading, candlesticks can, and do, go a long way to improving your odds of success. But remember, the effective use of candlesticks requires work and education. .

Why CandleLight?

We have been

To learn more about CandleLight, call (800) 678-5253 or follow this link to contact us on-line!!

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Last Updated: 9/12/97