There’s an old Japanese proverb that says,
If you wish to know the road, inquire of those who have traveled it
Technical Analysis is relatively new to us in the Western world. Charlie Dow originally wrote down his principles towards the end of the 1800s. But technical analysis can be traced all the way back to early 18th Century Japan when the Dōjima Rice Exchange began to issue and accept rice warehouse receipts. These rice receipts were essentially the first futures contracts ever traded. My man Munehisa Homma originally started trading at his local rice exchange in the port city of Sakata. This is why you frequently come across the “Sakata Rules” regarding Japanese Candlesticks. After Homma dominated his local markets, he went to trade in what today we call Tokyo. In order to learn about the psychology of investors, Homma analyzed prices on the rice exchanges going back to the 1600s. [Read more…]