Hello Everyone, Today we will be talking about The Secrets of Sokyu Homma Related to Charts
So let's start with
1. The Sokyu Honma's Two Methods
1. The Samini No Den of the Market
2. The Sakata strategies
2. The first Method, The Samini No Den of the Market (The Subjective Part of the Method)
The first part of Sokyu Honma’s method, the Samni No Den of the market, seeks to develop adequate reflexes and the right attitude of a trader in us. Here is the method and its five rules:
The Five Rules :
1. Without being greedy, look at past market movements and think about the time/price ratio.
2. Try to buy a bottom and sell a top.
3. Increase your position after a rise of 100 bags from the bottom or a decline of 100 bags from the top.
4. If your forecast is incorrect, try to recognize your mistake as soon as possible. Then, close your position and stay out of the market for 40 to 50 days
5. Close 70 to 80 % of your positions, if they are profitable, closing what is left after a top or a bottom is reached.
3. Examining the Simple and Powerful Methods
(HOW TO MASTER YOUR TRADING: YOUR FIRST STEP TO SUCCESS)
Rule 1
This rule tells us to measure and study the time/price relationships. Note that this approach was at the heart of Gann’s method, for which an equilibrium between time and price is crucial.
This rule enables us to categorize the movements of the market in terms of time and price. Here is an example: the market has risen x points in y weeks from a historic bottom to a historic top. During this rise, there have been upward movements for each swing of p points and w weeks. Within this same movement, corrections and consolidations are each within a range of d points for a duration of e weeks. We follow the same procedure for the movement from the historic top to the historic bottom. This measuring technique may be applied to any time frame. The rule tells us that we must not be greedy. It is important that we do not try to obtain the maximum possible gain, as indicated by past movements. We must try to win without becoming greedy. In this way, we will avoid the risk of overstaying in the market and seeing our gains disappear. Unfortunately, this is exactly what happens to most traders. Therefore, choose an exit point that will limit your avarice and that, at the same time, is indicated by the market itself. Here, only practice will bring you knowledge. By studying the time/price ratios, you will discover things – the market itself will speak to you. Remember that the only master is the market. Remember also that it is necessary to have a practical attitude – a way to knowledge by doing. I can guarantee that this rule alone will enable you to succeed in the market. The rule has another benefit. It will make you invulnerable. No one else will have knowledge of your tactic. It will be your secret.
Rule 2
This rule does not tell us to buy bottoms and sell tops but to attempt to do it. This is something completely different. Act at the right time. Avoid the temptation to buy when it is already too late. Anxiety and impatience push us toward this kind of behavior. Learn to wait for only the best opportunities.
Rule 3
Increase your position following a rise of 100 bags from a bottom or a decline of 100 bags from a top. This rule indicates a price/volume ratio. For any given price change, there is a corresponding change in volume. Here, the market is inverted because the price was fixed and the volume was variable at the time. A rise of 100 bags means a drop in price. A decline of 100 bags means a rise in price. This rule tells us to increase our position in the direction of the market (i.e. increase our position only if the market continues to rise; we should not increase our position if the market is down unless it progressively declines). It also tells us to increase progressively only until our positions have been completed. For example, if we buy 900 shares, we must break up our buying into several purchases. We buy first, say, 300 shares at one price and the next 300 only if the market goes our way. We buy the last 300 shares only if the market continues to go our way. Do not buy everything at the same time! Exercising patience is a much worthier goal than winning in the market. Thanks to our exercise of patience, we will end up by having a much greater number of winning trades. Someone may argue, ‘But when there is an opportunity, why not place all our positions in the beginning?’ Greed has just made its appearance. A fatal mistake!
Rule 4
In case we are wrong, we must close our positions and stay away from the market for a period of 40 to 50 days. This advice is a nugget of wisdom. It conceals a secret and is a mystery in itself. Even though the meaning of the rule is to refrain from the market activity so that we can have a clear mind, the following literal sense of this rule is excellent. Not only will your mind relax and rest, but also your unconscious will have time to integrate and perfect your strategy and tactic, enabling you to see ‘clearly.’ You will receive insight that only comes as a result of patience and waiting. The secrets of trading will be made clear.5 Once again, we hear a call for patience and a warning to control greed. Understand whoever can!
Rule 5
Close 70 to 80 % of your positions as soon as you have the minimum expected gain. Wait until the end of the movement to close the others. Here, once again, it is studying the market that will tell us when to close each position. Again, this rule is a call for our patience and a warning to keep greed under control. Many traders want to close their positions as soon as they have a small gain. This leads, as a consequence, to achieving big losses and small gains. We must learn to wait and have the courage to see our position develop according to the precise plan that was prepared in the beginning. One must recognize that a plan that was prepared previously will tell us exactly when to close the first 70 or 80 % of our position and when to close the rest – taking into account the risk/reward ratio known and tested in advance. This rule contains a hidden and powerful secret. It is up to you to discover it! Up to this point, we have examined the five rules of the subjective part of the method. Their logic is consistent. Further, the five have a common denominator – a call for patience and to control greed. This is a mastery of self that has, as a result, the mastery of time, because we learn to wait for the right moment, and the mastery of price, since we learn to buy at the right price. There is a rigorous linking of the five rules. The first rule indicates the fundamental principle of the market and its fluctuations in time and price. It tells us to measure them, to measure objectively the natural market movement – its oscillators or swings. Once the extent of this movement is known, the second rule tells us when to take action within these movements. We must wait for the right time. Once we know when to buy and when to sell, we must still learn how much to buy or sell. Rule 3 tells us this. Finally, once we are engaged in a trade, we must know when to exit and close our position with a gain or a loss. Rules 4 and 5 tell us this.
4. In this way, the Samni No Den, the part of Sokyu Honma’s method which consists of the subjective five rules, will have taught us:
1. How to manage time and price.
2. How to manage buying and selling points.
3. How to decide what size of position to take.
4. How to manage losses.
5. How to manage wins.
5. The Second Method, The Sakata Methods (The Objective Part of the Method) SAKATA’S FIVE METHODS AND THEIR CORRESPONDING MARKET PHASES
The ‘five Sakata methods’ belong to the objective part of Sokyu Honma’s method and focus on the structures or phases of the market. There are five structures or basic configurations:
The Five Rules :-
1. San Zan means three mountains and is the triple top.
2. San Sen means three rivers and is the triple bottom.
3. San Ku means a triple gap and refers to the empty intervals between prices.
4. San Pei means three lines and refers to a continuously ascending trend that is composed of three time/price units.
5. San Poh means three rests and refers to a corrective movement within a trend that is made up of three time/price units.
6. Each of these strategies or methods is related to a specific market phase or configuration. These phases are: If You Don't Understand then Refer to the Picture. In the Next Part, We will Give a Complete Representation of It.
Premutation of the Five Phases :-
(a) 1 and 2: turning points, tops or bottoms;
(b) 3: gaps;
(c) 4: trends;
(d) 5: consolidations, or times when markets rest before continuing their trend.
So let's start with
1. The Sokyu Honma's Two Methods
1. The Samini No Den of the Market
2. The Sakata strategies
2. The first Method, The Samini No Den of the Market (The Subjective Part of the Method)
The first part of Sokyu Honma’s method, the Samni No Den of the market, seeks to develop adequate reflexes and the right attitude of a trader in us. Here is the method and its five rules:
The Five Rules :
1. Without being greedy, look at past market movements and think about the time/price ratio.
2. Try to buy a bottom and sell a top.
3. Increase your position after a rise of 100 bags from the bottom or a decline of 100 bags from the top.
4. If your forecast is incorrect, try to recognize your mistake as soon as possible. Then, close your position and stay out of the market for 40 to 50 days
5. Close 70 to 80 % of your positions, if they are profitable, closing what is left after a top or a bottom is reached.
3. Examining the Simple and Powerful Methods
(HOW TO MASTER YOUR TRADING: YOUR FIRST STEP TO SUCCESS)
Rule 1
This rule tells us to measure and study the time/price relationships. Note that this approach was at the heart of Gann’s method, for which an equilibrium between time and price is crucial.
This rule enables us to categorize the movements of the market in terms of time and price. Here is an example: the market has risen x points in y weeks from a historic bottom to a historic top. During this rise, there have been upward movements for each swing of p points and w weeks. Within this same movement, corrections and consolidations are each within a range of d points for a duration of e weeks. We follow the same procedure for the movement from the historic top to the historic bottom. This measuring technique may be applied to any time frame. The rule tells us that we must not be greedy. It is important that we do not try to obtain the maximum possible gain, as indicated by past movements. We must try to win without becoming greedy. In this way, we will avoid the risk of overstaying in the market and seeing our gains disappear. Unfortunately, this is exactly what happens to most traders. Therefore, choose an exit point that will limit your avarice and that, at the same time, is indicated by the market itself. Here, only practice will bring you knowledge. By studying the time/price ratios, you will discover things – the market itself will speak to you. Remember that the only master is the market. Remember also that it is necessary to have a practical attitude – a way to knowledge by doing. I can guarantee that this rule alone will enable you to succeed in the market. The rule has another benefit. It will make you invulnerable. No one else will have knowledge of your tactic. It will be your secret.
Rule 2
This rule does not tell us to buy bottoms and sell tops but to attempt to do it. This is something completely different. Act at the right time. Avoid the temptation to buy when it is already too late. Anxiety and impatience push us toward this kind of behavior. Learn to wait for only the best opportunities.
Rule 3
Increase your position following a rise of 100 bags from a bottom or a decline of 100 bags from a top. This rule indicates a price/volume ratio. For any given price change, there is a corresponding change in volume. Here, the market is inverted because the price was fixed and the volume was variable at the time. A rise of 100 bags means a drop in price. A decline of 100 bags means a rise in price. This rule tells us to increase our position in the direction of the market (i.e. increase our position only if the market continues to rise; we should not increase our position if the market is down unless it progressively declines). It also tells us to increase progressively only until our positions have been completed. For example, if we buy 900 shares, we must break up our buying into several purchases. We buy first, say, 300 shares at one price and the next 300 only if the market goes our way. We buy the last 300 shares only if the market continues to go our way. Do not buy everything at the same time! Exercising patience is a much worthier goal than winning in the market. Thanks to our exercise of patience, we will end up by having a much greater number of winning trades. Someone may argue, ‘But when there is an opportunity, why not place all our positions in the beginning?’ Greed has just made its appearance. A fatal mistake!
Rule 4
In case we are wrong, we must close our positions and stay away from the market for a period of 40 to 50 days. This advice is a nugget of wisdom. It conceals a secret and is a mystery in itself. Even though the meaning of the rule is to refrain from the market activity so that we can have a clear mind, the following literal sense of this rule is excellent. Not only will your mind relax and rest, but also your unconscious will have time to integrate and perfect your strategy and tactic, enabling you to see ‘clearly.’ You will receive insight that only comes as a result of patience and waiting. The secrets of trading will be made clear.5 Once again, we hear a call for patience and a warning to control greed. Understand whoever can!
Rule 5
Close 70 to 80 % of your positions as soon as you have the minimum expected gain. Wait until the end of the movement to close the others. Here, once again, it is studying the market that will tell us when to close each position. Again, this rule is a call for our patience and a warning to keep greed under control. Many traders want to close their positions as soon as they have a small gain. This leads, as a consequence, to achieving big losses and small gains. We must learn to wait and have the courage to see our position develop according to the precise plan that was prepared in the beginning. One must recognize that a plan that was prepared previously will tell us exactly when to close the first 70 or 80 % of our position and when to close the rest – taking into account the risk/reward ratio known and tested in advance. This rule contains a hidden and powerful secret. It is up to you to discover it! Up to this point, we have examined the five rules of the subjective part of the method. Their logic is consistent. Further, the five have a common denominator – a call for patience and to control greed. This is a mastery of self that has, as a result, the mastery of time, because we learn to wait for the right moment, and the mastery of price, since we learn to buy at the right price. There is a rigorous linking of the five rules. The first rule indicates the fundamental principle of the market and its fluctuations in time and price. It tells us to measure them, to measure objectively the natural market movement – its oscillators or swings. Once the extent of this movement is known, the second rule tells us when to take action within these movements. We must wait for the right time. Once we know when to buy and when to sell, we must still learn how much to buy or sell. Rule 3 tells us this. Finally, once we are engaged in a trade, we must know when to exit and close our position with a gain or a loss. Rules 4 and 5 tell us this.
4. In this way, the Samni No Den, the part of Sokyu Honma’s method which consists of the subjective five rules, will have taught us:
1. How to manage time and price.
2. How to manage buying and selling points.
3. How to decide what size of position to take.
4. How to manage losses.
5. How to manage wins.
5. The Second Method, The Sakata Methods (The Objective Part of the Method) SAKATA’S FIVE METHODS AND THEIR CORRESPONDING MARKET PHASES
The ‘five Sakata methods’ belong to the objective part of Sokyu Honma’s method and focus on the structures or phases of the market. There are five structures or basic configurations:
The Five Rules :-
1. San Zan means three mountains and is the triple top.
2. San Sen means three rivers and is the triple bottom.
3. San Ku means a triple gap and refers to the empty intervals between prices.
4. San Pei means three lines and refers to a continuously ascending trend that is composed of three time/price units.
5. San Poh means three rests and refers to a corrective movement within a trend that is made up of three time/price units.
6. Each of these strategies or methods is related to a specific market phase or configuration. These phases are: If You Don't Understand then Refer to the Picture. In the Next Part, We will Give a Complete Representation of It.
Premutation of the Five Phases :-
(a) 1 and 2: turning points, tops or bottoms;
(b) 3: gaps;
(c) 4: trends;
(d) 5: consolidations, or times when markets rest before continuing their trend.
