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Markets Sanmi No Den by Munehisa Homma

According to Munehisa Homma, “the method of looking at rice market price movements to predict the following day’s movements, was first thought up by a man by the name of Sokyu Honma and was called the Sakata Constitution”.

The port of Sakata was the primary distributor of one of the most important commodities in Japan; rice. Homma carefully studied the rice market and began to notice tendencies and patterns. This method was divided into two groups called the “Markets Sanmi No Den” and “Sakata strategies”.

The markets Sanmi no den contained a set of rules for actions to take based upon different market scenarios. His original method predated the Japanese candlestick charts however he later created the candlestick chart and applied his patterns to them.

Learnings or Rules from The Fountain of Gold Book

  1. In trading, the beginning is crucial If the beginning is bad, the ensuing course will continue in disorder. You should never rush when entering trading because rushing is the same as a bad beginning. When buying or selling, wait for three days from the moment you feel you could profit from a certain market condition. This is the rule. Consider the distribution condition of the rice in addition to the ceiling and bottom prices of it before you make your decision.
  2. The rise and fall of the rice price follows the law of nature, and it is hard to identify either the down or up moments while it goes up and down continuously. Those who are ignorant of this rule should not even attempt to try their hand at trading.
  3. Wait Calmly When You Have Missed the Perfect Time to Buy – If the rice price goes up by 2 koku just when you have decided to buy rice, you may think you missed the perfect time to buy and it is a better time to sell, but this would be a big mistake. When you have missed the best time to buy, you should wait for the next opportunity to buy.
  4. Aim for a Bigger Profit: Don’t Rest on a Small Profit – There are times when just as you have made your buy at the bottom and expected some profit, the price stagnates or goes down slightly. When this happens you think you have miscalculated the market and you regret that you didn’t sell when the price went up previously. But this is the wrong way to think. When you buy at the bottom, you should never sell until the trend makes a shift.
  5. When You Have Made a Wrong Decision, Sell Quickly and Rest – You should never distribute and accumulate at a time of bad luck. When you have made a wrong decision, quickly sell off and take a break for 4-50 days. Even if the trading has happened as you expected, take a break for 4-50 days after the trading, think of the distribution of the rice and the appropriate timing based on the “Three Methods” before you make your next move. Above all, remember you are sure to cause a loss when the trading concludes if you forget about this break upon seeing an opportunity for profit. However, taking a break after concluding a trade does not mean resting without any thought of the market; you closely watch the market movement with a calm mind during this break. If you find an opportunity to make a profit based on the selling method of the previous year, you are likely to become attached to it. But the best thing is to let go of your attachment to the previous year, and think of the current year’s harvest, the volume of offerings, and the market mood. 
  6. Don’t Be Carried Away by Winning- Never let yourself be carried away by winning when you have achieved 80-90% of your goal after several months. Instead, focus on making a profit naturally. You must never ever lose yourself in greed.
  7. Eye the Bottom, Aim for the Ceiling– When you buy and sell, you have to eye the bottom and aim for the ceiling. You must keep this in mind.
  8. You Will Succeed Only When You Sell Well- There is no major change within a year, except for a rise once, and a fall once. Even
    during the rise, the price goes down slightly, and during the fall, it goes up slightly. But this repeated cycle is not the market trend that is headed to the ceiling. Don’t be fooled by the repeating cycle of market action. The first step is more important than anything. The decision to buy should not be made lightly; don’t be dispirited when you see an opportunity for profit-making. The decision to sell may look easy but it is very difficult to handle. When the price starts going down, you have to buy back because you cannot tell how far down it is going to fall. When the price falls, don’t lose yourself in the commotion of others. The best thing to do is to let go of any greed, and buy out.
  9. Going Against the Trend is Not Allowed- There are times when you decide to sell off your offerings because your forecast for the market is gloomy, but your forecast turns out to be wrong and it leads you to loss. Intending to distribute,28 some people begin to sell off their rice when the price is moving upward, but this is very wrong. You must not go against the trend. The same applies when you buy. When you realize your market forecast was wrong, take your hands off the market and remain observant. 
  10. When Tempted to Enter Trading, Wait Two Days When your inner voice tells you, “the rice price is sure to go up, I must buy it today”, wait
    for two days. It is the same when it whispers “it is sure to go down”. This is a profound secret. When the price has reached the ceiling, the best thing you can do is to identify the time to sell. The best thought you can have when the price reaches the ceiling is the thought of selling. When it is at the bottom, the thought of buying is the best. You should not forget this.
  11. Do Not Buy at the Ceiling or Sell at the Bottom- Just remain mindful of the market. You can never tell either the ceiling or the bottom while the price is moving up or down, and besides you often become caught up in the hype and insist on either selling or buying without thinking of the time when the up or down action comes to an end until you cause a loss of money. When the price is going up unusually high, count on it to go down for certain. When it goes down, count on it to go up later, all the while waiting for an opportunity with determination, and letting go of greedy minds.
  12. Mindset is Everything- When trading futures in the eleventh month of frost, your mindset is the most important. For example, you should be ready, in your mind to make 500 koku of profit when you can make a thousand koku of profit, depending on your financial situation. You should also take 50 koku of profit when you could have made 100 koku of profit. Unless your mind is set in this way, you will be tempted and reckless, trade be it at the ceiling or at the bottom until you fail to make any profit after having worked so hard. Those who want to take this path have to have this kind of mindset.
  13. Do Not Rush to Trade- Don’t rush in trading. When you sell or buy based on your personal thoughts, it is because you have no skills and you think there is no tomorrow in the market. You make your move only when you are certain of the timing after waiting for days and even
    months, all the while remaining watchful of market fluctuation. You make mistakes because you make your move without being mindful of the ceiling and the bottom. All this is because you rush to trade.
  14. Decide on the Capital Before You Start– When entering the trade, you must decide on the source of your capital, and how much you are going to use for trading. If you are on the buying side, you can begin with just a little capital and buy rice in small quantities, and when you start making profits, you can increase the volume of your purchase until you buy the volume you had targeted originally. If everything goes the way you anticipated, you must wait until you are sure of the price increase. If the price increase is far more than you expected, you can easily
    become greedy and get carried away by a few wins.
  15. Do Not Start Trading As a Pastime- is a common piece of advice for individuals who are considering entering the world of trading and investing. Trading can be a complex and risky activity, and it is important for individuals to understand the potential risks and rewards before they get started. Trading should not be viewed as a simple way to make quick money or as a way to pass the time. Instead, it should be treated as a serious business venture that requires careful planning, research, and strategy in order to be successful. Individuals who are considering trading should be prepared to devote a significant amount of time and effort to learning about the markets and developing their skills, and should only trade with money that they can afford to lose.

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Chart Source– Tradingview.com

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