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SAKATA’S 5 METHODS
“Sakata’s 5 methods” strategies are more than 200 year old. The patterns are mostly reversal formations.
1) THREE MOUNTAINS (SANZAN)
The same as triple top formation but in candlesticks. When the middle mountain is higher than the other two the formation becomes a three Buddha formation which is the alike the head and shoulders formation.
Figure11. Three mountains candlestick formation
Figure12. Inverse three Budda formation
Other formations are the “Three Rivers (sansen)” and the “Three Gaps (Sangu)”. These patterns occur in market with gaps, mostly futures. Not useful in Forex market where gaps are relatively rare.
2) THREE PARALLEL CANDLESTICKS (SAMPEI)
It refers to the similarity of direction and velocity of three consecutive candles. It is a reversal formation signaling reversal after an extended rally. When bullish the formation is called the three soldiers. When bearish it is called the three crows (inverted three soldiers).
Figure13. Three crows candlestick formation
3) THREE METHODS (SAMPO)
Three candlesticks of the same velocity and direction after an opposite direction candlestick. The last candlestick does not go significantly further from the high or low of the first candlestick before the formation. This formation advises trader to pause its trade because market does not go straight up or down.
When SAMPEI does not happen after and extended rally but midway through a trend it provide us an exit signal before the continuation of the trend takes place. It is basically a continuation pattern signaled after a short reversal. |
