Candlesticks have been around a lot longer than anything similar in the Western world. The Japanese were looking at charts as far back as the 17th century, whereas the earliest knowncharts in the US appeared in the late 19th century. Rice trading had been established inJapan in 1654, with gold, silver and rape seed oil following soon after. Rice marketsdominated Japan at this time and the commodity became, it seems, more important than hard currency.
Munehisa Homma (aka Sokyu Honma), a Japanese rice trader born in the early 1700s, is widely credited as being one of the early exponents of tracking price action. He understood basic supply and demand dynamics, but also identified the fact that emotion played a part in the setting of price. He wanted to track the emotion of the market players, and this work became the basis of candlestick analysis. He was extremely well respected, to the point of being promoted to Samurai status.
The Japanese did an extremely good job of keeping candlesticks quiet from the Western world, right up until the 1980s, when suddenly there was a large cross-pollination of banks and financial institutions around the world. This is when Westerners suddenly got wind of these mystical charts. Obviously this was also about the time that charting in general suddenly became a lot easier, due to the widespread use of the PC.
In the late 1980s several Western analysts became interested in candlesticks. In the UK Michael Feeny, who was then head of TA in London for Sumitomo, began using candlesticks in his daily work, and started introducing the ideas to London professionals. In the December 1989 edition of Futures magazine Steve Nison, who was a technical analyst at Merrill Lynch in New York, produced a paper that showed a series of candlestick reversal patterns and explained their predictive powers. He went on to write a book on the subject, and a fine book it is too. Thank you Messrs Feeny and Nison.
