STA Blog

Reading through my newly purchased book, Atlas of Finance compiled by Dariusz Wójcik and published by Yale University Press, I came across these candlestick charts profiling recoveries post the 2008 stock market crash. Labelled ‘advanced’, ‘emerging’ and ‘frontier’ markets, nothing special here. Yet this is a text book with chapters on ‘investors and investments’, ‘bubbles and crises’ plus ‘regulation and governance’. Very much an economics textbookwhich some years ago would not have heard of this type of chart.

This reminded me of when I first came across candle charts; I’d started off with bar charts and point & figure ones in 1982. I’d heard of the Japanese ones in the early 1990s but had only used them religiously, and daily, since 1997. The man who brought these to the Western world was American Steve Nison who had worked at Merrill Lynch in Tokyo and, with help from his Japanese colleagues and the NTAA (Nippon Technical Analysts Association) wrote Japanese Candlestick Charting Techniques, published by Simon & Schuster in 1991. He says: ‘’In Japan, where proverbs are respected, ‘candles exhaust themselves to give light to man’ ‘’.

But before that, in 1986, my colleagues and I at Midland Bank devoured the then relatively unknown book by Welles Wilder Jr. New Concepts in Technical Trading Systems, published in 1978 by Trend Systems. The text included, for the first time, concepts such as DMI, Parabolic SAR and RSI. Great excitement all round as we devised trading systems with this new-found knowledge.

A gentleman also at the forefront new ideas was another American, Tom DeMark. Publishing New Market Timing Techniques: Innovative Studies in Market Rhythm and Price Exhaustion in 1997 with Wiley Trading, his concept was quickly snapped up by the analytics people at the Bloomberg terminal – as they and CQG had latched onto the candles earlier on.

Another very popular concept today is Market Profile, stemming from the futures market pits where trading sessions are divided into half-hour segments.Developed by J. Peter Steidlmayer, perhaps the most useful of his many books is Trading with Market Profile, published by Wiley in 2002.

Rounding off this piece, I too introduced the West to another Japanese charting technique, Ichimoku Clouds, with my snappily titled Ichimoku Charts book published by Harriman House in 2007. Reuters had these on their system by the mid-1990s, but it was only thanks to my Japanese work colleagues that I learnt how to use them. Once again collaboration at work.