Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ The Secret Code of Japanese Candlesticks Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ For other titles in the Wiley Trading Series please see www.com/finance Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ THE SECRET CODE OF JAPANESE CANDLESTICKS Felipe Tudela Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Copyright © 2008 Felipe Tudela Email (for orders and customer service enquiries): cs-books@wiley.uk Visit our Home Page on www.com All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to permreq@wiley.uk, or faxed to (+44) 1243 770620. Designations used by companies to distinguish their products are often claimed as trademarks.
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Library of Congress Cataloging in Publication Data Tudela, Felipe. The secret code of Japanese candlesticks / Felipe Tudela. Includes bibliographical references and index. ISBN 978-0-470-99610-2 (cloth : alk.
Stocks—Charts, diagrams, etc.63 2042—dc22 2007050378 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978-0-470-99610-2 Typeset in 10/12pt Times by Integra Software Services Pvt. Ltd, Pondicherry, India Printed and bound in Great Britain by TJ International Ltd., Padstow, Cornwall, UK Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Contents Acknowledgments vii Introduction ix 1 The Truth about Japanese Candlesticks 1 2 The Spirit of Sokyu Honma’s Method: The Master and the Disciple 3 3 The Samni No Den of the Market: The Subjective Part of the Method 5 4 The Five Sakata Methods: The Objective Part of the Method 9 5 Trading with Sokyu Honma’s Method 15 6 Japanese Candlesticks: A Precision Tool within the Market’s Great Cycle 27 7 Algorithm in Tabular Format for the Five Sakata Methods within Sokyu Honma’s ‘Great Cycle’ 37 8 Thirty-seven Applications Involving Indexes, Stocks, and Futures 51 9 Back to the Samni No Den 99 10 Learning to Analyze the Markets from a Trader’s Viewpoint 105 11 Your Magic Talisman 117 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ vi Contents 12 Before Taking a Position Think! 125 13 How to Exit a Trade 137 14 How to Manage Your Risk 141 15 All You Will Ever Need to Know about Stops 153 16 Putting It All Together in a Simple but Winning Approach 159 17 Trade Now! 163 18 Some Thoughts about Trading Philosophy 167 Conclusion 175 Appendix What Is a Candlestick? 177 Notes 179 Bibliography 185 Index 187 Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Acknowledgments I want to thank, first of all, Thomas DeMark without whom this book would not exist. He immediately recognized the value of my work, encouraged me in my research, and made it possible for this book to be published by John Wiley & Sons, Ltd. I have always admired Tom’s work and his encouragement gave me the confidence and resolve that I needed to complete this book.
I must also thank Patrick Sauty, Vice President of AFATE (French Association of Technical Analysis), who was the first to organize a seminar in Paris in which I was able to explain this new perspective of Japanese Candlesticks. Thanks also go to Thiérry Béchu, former president of AFATE, teacher at Dauphine and fund manager for SGAM (Société Générale Asset Management); Etienne Laisney, who teaches Technical Analysis at l’ISEP and l’ESG; Julien Nebenzahl, CEO of Day by Day and President of AFATE; and Joël Villecroze, CEO of Trium, Equity & Derivatives. In addition, I would like to thank my friends, Don Mack, former editor of the Traders Masterclass series at Pitman Publishing Financial Times, and Albert Labos, teacher, trader and magician, for having shared their insightful knowledge of markets with me. I extend a very special and unique thank you to my wife, Annie, whose love, company, and support helped me to create the space and time in which to do this book.
Finally, a word of thanks to those who helped me along the way to make this book a reality. Here I especially want to mention Cherline Daniel of Integra, Pamela van Giessen of John Wiley & Sons, Inc., and Caitlin Cornish, Aimée Dibbens, Karen Weller and Louise Holden of John Wiley & Sons, Ltd, whose help was indispensable. I would also like to thank Shawn Fawcett, who provided me with the best possible blueprint to create a book, George Robinson, who gave attentive and focused care to the edit, and Jose Antonio Pancorvo, who also took the time to read the book and make useful suggestions to improve it. Lastly, a thank you is due to all of my friends and students who helped me along the way.
Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Introduction Would you like to acquire a powerful trading tool that is efficient and precise? Such a tool exists. It is the foundation to ‘Japanese candlesticks.’ This book is about them. You are about to discover the truth about Japanese candlesticks. It is a truth that no one has ever explained before! Japanese candlesticks are fashionable.
Their exotic nature attracts the public to them and they are surrounded by an aura of arcane science and seem inaccessible to the uninitiated. They have a magic of their own – the magic of an ancient civilization – and also have strange-sounding names – Dojo, Marubozu, etc. However, they do not work efficiently, except for a very small number of traders. The reason for this is that few people today are willing to study a trading method until they master it.
Candlesticks are also difficult to handle, given the diversity of their patterns. Most important is the fact that Japanese candlesticks have a unique master key that must be understood in order to make them work. We are going to explain this key and illustrate it with practical examples. It will change your way of looking at candlesticks and at markets.
Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ 1 The Truth about Japanese Candlesticks The truth about Japanese candlesticks is very simple. ‘Japanese candlesticks’ refers to the method that has guided the success of Japanese traders for centuries. Orig- inally, Japanese traders made no use of Japanese candlesticks. They used another method.
From time to time, a contemporary author mentions it briefly, without making it part of his trading or giving it the prominence that it deserves. This method, which was used prior to candlesticks, is not explained in any book. What method was employed by the Japanese traders, who had no use for Japanese candlesticks? We will come to that soon, but first let us trace its history. THE ORIGIN OF JAPANESE CANDLESTICKS OR HOW KNOWLEDGE OF THEIR HISTORY COULD TURN YOU INTO A SUCCESSFUL TRADER Kosaku Sato was born in 1716 during the Tokugawa period in the city of Sakata in the Yamagata prefecture.
It was the eighth shogunate. Kosaku Sato was adopted by the Honma family and became known as Sokyu Honma. Sakata was then one of the main ports and centres for rice distribution. This is where Sokyu Honma built a fortune founded on his study of fluctuations in the price of rice.
He developed tactics and strategies that made him an awe-inspiring man in Osaka, Kyoto, and Edo. His personality was charismatic. He was thought of as a ‘man of knowledge’ and a ‘market magician.’ His reputation was such that the Emperor bestowed the title of ‘bushi’ or ‘samurai’ on him. Sokyu Honma was a strategist and a market warrior1 whose exploits were celebrated by a popular song of the time: Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ 2 The Secret Code of Japanese Candlesticks When it shines in Sakata, its cloudy in Dojima and in Edo it rains.
Nobody could ever be a Honma, But everyone would like to be at least a lord.2 Sokyu lived to be 87 years old and died in Edo. His trading had been based on a secret method that he had created. This method, passed down from generation to generation, is the subject that we will explore in this book. SOKYU HONMA’S METHOD Honma’s method has two parts.
Neither mentions candlesticks. These two parts are: (a) the Samni No Den of the Market; (b) the Sakata strategies. These will be explained, but a question remains: ‘At what time do Japanese candle- sticks make their appearance, since the master makes no mention of them?’ Japanese candlesticks made a late appearance – near the end of the nineteenth century.3 They were developed at the beginning of the Meiji era in Japan, although their exact origin is unknown. However, there are many hypotheses.
One hypothesis suggests that candlesticks were a kind of bar chart that was used by some American traders and was subsequently taken over and developed by the Japanese. What really matters is that Japanese traders using candlesticks, whatever their origin or power, must use Sokyu Honma’s method, above all. Japanese candlesticks exist for one reason – to refine and give added precision to Sokyu Honma’s method. However, the true method belongs to Sokyu Honma.
This method is so simple, so logical, and so powerful in its simplicity that it can perform without Japanese candlesticks. As William of Occam, a Western fourteenth century master logician, said, ‘entia non multiplicanda,’ or ‘let’s keep it simple.’ In the following pages, we will explain this method. Trắc nghiệm kiến thức Forex tại : https://tracnghiemforex.com/ 2 The Spirit of Sokyu Honma’s Method: The Master and the Disciple As we learned in the previous chapter, Sokyu Honma developed his method in two parts: (a) the Samni No Den of the market (the subjective part of the method); (b) the Sakata strategies (the objective part of the method). All great traders possess the same spirit and the same reflexes.
Both parts of Sokyu Honma’s method prove that he understood the immutable principles of a savvy speculator. The Samni No Den of the market concerns the subjective point of view – the trader’s attitude. The Sakata strategies relate to an objective point of view – the market’s basic structures. Both perspectives constitute an indivisible whole, because to operate in the markets implies a knowledge of the market and a knowl- edge of oneself.
What role does theory play in all of this?