|  MAR 1992

Candlesticks And The Method Of 3 by Gary S. Wagner and Bradley L. Matheny

Candlesticks And The Method Of 3 by Gary S. Wagner and Bradley L. Matheny Various uses of the number three, a number of importance in Japanese culture as well as Western culture, can be seen prominently throughout candlestick technique and particularly in the form of ""Sakata's five methods."" The five methods, though more than 200 years old, can be used in current-day trading with little modification, as Wagner and Matheny show. In previous articles, we wrote about using artificial intelligence and pattern recognition to analyze candlestick charts and the importance of properly identifying two and three candle patterns. However, a particular method of candlestick analysis has rarely been discussed except as an aside, and yet this method is one of the most important candlestick teachings. Various patterns with different meanings comprise the Japanese candlestick technique. Before signals can be identified properly, therefore, both single-candle and multicandle patterns must be identified and analyzed in relation to each another. THREE AGAINST FOUR According to Seiki Shimizu in The Japanese Chart of Charts, the Japanese believe that the number three has a ""divine power that lives within it""; many candlestick patterns are based on the number. However, the number four is considered bad luck. One Japanese pronunciation of the number is the same as the word ""death"" (shi). However, the Japanese culture is not the only one that classifies data by threes; Western technical analysis itself uses three fairly often. It can be found in many examples of technical analysis. For example, it can be found in: r Trend directions 1) Up 2) Down 3) Sideways

by Gary S. Wagner and Bradley L. Matheny