Takashi Kokodekawa and CIS: A Japanese Legend - The Transformation from "Contrarian Hunter" to "Trend Master"

In the legendary stories of Japan’s stock market, two traders’ names shine brightly. One is known by the code name BNF, Takashi Kotegawa, revered as the “God of Trading” for his incredible profit-making ability; the other is CIS, who proudly calls himself the “Strongest Retail Investor.” They are longtime friends and mirrors of each other—both started trading in college, turning a few million yen into over a billion through ten years of relentless effort. The most talked-about story about these masters is the famous 2005 J-COM order mistake event, when CIS made 600 million yen in a day, and Kotegawa raked in 2 billion yen in just 10 minutes, roughly 150 million RMB at the exchange rate at the time.

Unlike the generally low-profile style of Japan’s trading community, Kotegawa once shared his trend-following trading principles, and CIS also introduced his own trading rules—these two methods have since been studied, refined, and remain some of the most practical references in the market today.

The God of Trading, Takashi Kotegawa’s Early Secrets: Capturing Undervalued Opportunities

To understand how Kotegawa became a legend, we need to look back at his contrarian investing era. This period was crucial in growing his account from a few million yen to 100 million yen. Between 2000 and 2003, the internet bubble burst, causing a global stock market crash. Japan’s market was devastated, with investors sinking into collective pessimism, stock prices hitting rock bottom, and many high-quality companies severely undervalued.

Amid this seemingly hopeless environment, Kotegawa sensed a different opportunity. He deeply understood a fundamental market law: even in the most extreme bear markets, prices do not fall forever. Every sharp decline is followed by a rebound, and the market’s oscillations hide enormous profit potential.

Kotegawa’s contrarian strategy was based on a simple yet powerful observation: in highly pessimistic environments, many assets are far from their true value. His job was to identify these severely undervalued stocks and ride the rebounds. This required not only courage and resolve but also extensive fundamental research.

Divergence Rate Stock Selection Method: Kotegawa’s Carefully Crafted Tool

In screening undervalued stocks, Kotegawa developed a scientific quantitative method—divergence rate analysis based on the 25-day moving average. The core idea is: when a stock’s price deviates significantly from its average, it indicates an extreme condition, and a rebound becomes highly probable.

Specifically, suppose a stock’s 25-day moving average is 100 yen, but the current price is only 80 yen, creating a -20% divergence rate relative to the average. When the divergence rate is strongly negative, it usually signals severe undervaluation, a buy signal for Kotegawa. Conversely, if the price rises to 120 yen, with a +20% divergence, caution is needed as an over-optimistic correction may be imminent.

This method appears simple but embodies profound market philosophy. Different stocks and sectors have varying sensitivities to divergence rates. Large blue chips, small caps, and different industry sectors each have unique characteristics. Kotegawa set different divergence benchmarks for various categories, using them as precise entry indicators.

Market Turning Points and Strategy Evolution: From Contrarian to Trend Following

The turning point came in 2003. With Japan implementing economic reforms and the global economy entering recovery, the Japanese stock market fundamentally changed—from a bear to a bull market. Sharp-eyed Kotegawa immediately adjusted his trading strategy, a decisive shift that led to his true legend: his assets skyrocketed from 100 million yen to 8 billion yen, an 80-fold increase.

The new market environment demanded new tactics. During downturns, Kotegawa focused on “picking up bargains”—contrarian bottom-fishing; but as the market warmed, he switched to a completely different logic—closely following the upward trend, riding the wave rather than fighting it.

Kotegawa’s Trend-Following System: Long Positions and Industry Linkages

In a bull market, Kotegawa developed a unique trading style. He is famous for “two days and one night” short-term trading—typically opening positions on the day, holding overnight, then closing at the next morning’s open, and quickly switching to new targets. During this process, he often held 20 to 50 stocks simultaneously.

This may seem overly diversified, but it reflects his risk management philosophy: broad diversification reduces the risk of any single position. Even if some stocks underperform, gains from others offset losses, minimizing overall risk. This approach allows frequent trading while keeping losses manageable.

Kotegawa is also adept at leveraging industry resonance effects. He has a unique technique of finding “lagging stocks”—weak stocks that haven’t yet participated in an industry-wide rally. For example, in Japan’s steel industry, when one of the top four companies starts rising, he quickly shifts focus to the remaining three that haven’t reacted yet, buying lagging stocks to “ride the wave” of the entire sector.

CIS’s Trend-Following Principles: The Power of Market Continuation

While CIS hasn’t developed a complete quantitative methodology like Kotegawa, his market understanding is equally profound. His core principle: stocks that are rising tend to continue rising, and those falling tend to keep falling. This simple observation hits the essence of market movement—its persistence.

This contrasts sharply with most retail investors’ intuition. When investors see a stock has been rising for a long time, they instinctively think “it’s overbought and due for a correction,” imagining the market as a 50-50 game. But in reality, a strong stock attracts continuous inflows, and the momentum makes it even stronger. Conversely, abandoned weak stocks are more likely to be further pushed down.

This is why CIS insists on “buying on strength” and opposes “buying on dips.” Many traders see a stock rise, then dip briefly, and want to buy the dip. But no one can predict exactly when the correction will happen or how long it will last. In a strong bull market, waiting for a pullback often causes missed opportunities, with losses far exceeding the risk of holding high.

Shared Wisdom: Stop Loss, Risk Management, and Market Perception

Beyond specific methods, both Kotegawa and CIS share a fundamental view on trading. They emphasize the importance of stop-losses. CIS explicitly states that when a stock you bought starts to decline, the most rational move is to admit the trade failed and exit quickly. This contrasts sharply with traders who double down on losing positions—trying to recover losses by increasing bets, often leading to even bigger losses.

Neither master fixates on win rate or success ratio. They understand deeply that risk and losses are inevitable in any market. The key is to keep losses within controllable limits and allow profits to grow—embodying the principle of “small losses, big gains.”

Market Crises: The True Testing Ground for Traders

Both Kotegawa and CIS have issued a stark warning: do not blindly trust widely circulated “golden rules” of trading. Markets are complex, dynamic systems. Once rules become widely known and applied, they tend to lose effectiveness. Truly outstanding traders rely on unique perspectives and sharp judgment rather than rigid doctrines.

Interestingly, history’s greatest traders often emerge during critical moments—market crashes, economic crises, systemic collapses, or major turning points. When most participants panic and despair, markets unleash unprecedented volatility. The more intense the volatility, the richer the hidden opportunities. Those who remain calm, make quick decisions, and adapt are the ones who transform and stand out.

From Kotegawa’s shift from contrarian to trend following, to CIS’s insight into market persistence, these Japanese trading legends teach us that true trading wisdom lies not in fixed methods but in understanding market essence and managing personal risk strictly.