One of Sakata’s method baselines is that if you feel you could benefit from a certain formation, wait 3 days and if it still looks promising, enter the trade and you can most likely make profits. This method was developed by Munehisa Honma back in 1755 and has formed the bases of Japanese market philosophy.
Sakata’s method has its own set of candlestick patterns and they have been developed based on Honma’s 160 rules. The number 3 is important in case of his patterns – eg. Three rivers, three mountains, three soldiers, three methods, three gaps, three Buddhas.
Three Mountains
Previously, when talking about other type of charts and such I have mentioned the three top formations etc. This three mountains looks similar.
Three Buddhas – like head and shoulders formation.
Three rivers – opposite to the three mountains formation. This is basically a three bottom formation.
Note that in case of Sakata’s method there’s not just 1-5 candlesticks that we are looking at anymore but rather the whole chart which may consist of multiple weeks, months or years.
Three Gaps – after the market has bottomed, you can see three empty candlesticks going up, there’s a gal between all of them. Once the third long candlestick is visible, you can expect a reversal.
Three soldiers
I’d say it’s similar to the three gaps – three soldiers who are all going in the same direction, except that no gaps are required. Note that this is not a reversal but rather a CONTINUATION pattern.
Three Methods
This looks similar to the rising three of falling three method discussed in my other post. The market makes a pause within this pattern and starts to go in the direction of the trend again after the three methods is „over”.
