Books

Munehisa Homma, the pioneering Japanese rice trader, developed key trading rules and techniques centered on candlestick patterns and market psychology, as outlined in texts like the Sakata Senkin collection (also known as Honma's Fountain of Gold). His approach emphasized recognizing price patterns from daily open, high, low, and close data to predict reversals and trends.​

Sakata Rules

Homma formalized the "Sakata Rules," a set of five principles from Sakata traders that guided his strategies. These include identifying patterns like the "Three Mountains" for tops, "Three Rivers" for bottoms, and sequences like advancing soldiers (bullish continuation) or counterattack lines (reversal signals).​

Key Trading Tricks

Homma stressed timing over prediction, advising traders to wait for confirmation from candlestick formations such as dojis (indecision), spinning tops, or hanging men before entering positions. He advocated rest periods of 40-50 days after major market moves to avoid noise and recalibrate, while focusing on long-term trends rather than daily fluctuations

Practical Applications

His methods incorporated volume and sentiment analysis alongside candlesticks, using tricks like entering on the first confirmed bar after a higher timeframe trend alignment. Homma amassed wealth by exploiting rice market manipulations through these disciplined, pattern-based entries with defined risk