Munehisa Honma (本間 宗久) 1724-1803 is known as the father of the candlestick chart. He is believed to have been a rice merchant in 18th century Japan who traded the Dojima Rice market in Osaka. .
In 1710, a Japanese rice spot market was transformed into a futures market for rice. This market used coupons for future delivery of rice. A secondary trading market for coupons emerged in which Munehisa Honma created the first candlestick charts from the historical price action. Historical stories from the time say that he created a personal communication network of men spaced approximately every 6 kilometers over a distance of some 600 kilometers between Sakata and Osaka to track market prices as close to real time as possible.
He is believed to have written and published one of the first trading books of all time in 1755, The Fountain of Gold – The Three Monkey Record of Money. It was the first trading book known to ever be published on market psychology and trading psychology. In his book, Munehisa Honma explains that the psychology of the rice market was critical to success for a trader and that emotions drive rice prices. He explains that by identifying market sentiment a trader can take a position against an extreme move in one direction. “When all are bearish, there is cause for prices to rise.” as well as the inverse. He was the first known advocate of “buying the dip” and “selling the rip.”
Munehisa Honma explains the rotation of capital through a Yang bull market and Yin bear market and taught that within each type of trending market there is a smaller formation of the opposite type. He is reported to also have used weather and the volume of the rice market trades as other filters along with price action in his trading.
According to Steve Nison who brought candlestick charts to the West, classic candlestick charting was first developed in Japan after 1850. Munehisa Honma is credited with the invention of the first candlestick chart. It is highly probable that his original ideas were changed, modified, adapted, and refined over the past two centuries of trading to give us the current candlesticks charts software we use today.
Munehisa Homma: Father of the Candlestick Chart