The History of Candlestick Charting
The Japanese originally began using candlestick charting for technical analysis within the rice trade industry way back in the 1700s and was integrated into the US stock market by Charles Dow sometime in the early 1900s. The basic principles were very similar:
- The “what” (price action) is more important than the “why” (news, earnings, and so on).
- All known information is reflected in the price.
- Buyers and sellers move markets based on expectations and emotions (fear and greed).
- Markets fluctuate.
- The actual price may not reflect the underlying value.
Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today.