Takashi Kotegawa's Trading Legend: The Strategy Evolution Journey of Japan's Top Trader

In the Japanese trading circle, there are two legendary figures: one is the renowned BNF (real name Takashi Kotezawa), known as the “God of Trading”; the other is CIS, who leads the retail investor camp. Although they come from different backgrounds, they share many trading philosophies. Their success stories not only document personal wealth accumulation but, more importantly, leave behind methodologies of great practical value for future traders.

The Transformation from Zero to Billion

Takashi Kotezawa and CIS both started engaging in securities trading during their university years. By starting with small capital and gradually expanding their account size, they ultimately became traders managing billions of yen. Their reputations were firmly established due to the shocking J-COM erroneous order incident in 2005, which stunned the Japanese trading market. At that historic moment, CIS made a profit of 600 million yen due to his keen market sense, while Takashi Kotezawa’s performance was even more astonishing—he raked in a profit of 2 billion yen in just 10 minutes, which, converted at the time’s exchange rate, was nearly 150 million yuan. This battle made both of them irreplaceable legendary figures in the Japanese trading circle.

It is noteworthy that top traders like Takashi Kotezawa rarely shared their trading ideas publicly in the traditionally conservative and low-key Japanese trading circle. These valuable insights were subsequently organized and studied by numerous traders and gradually incorporated into their trading frameworks. Even today, these philosophies still maintain strong vitality in the market.

Takashi Kotezawa’s Divergence Rate Stock Selection Secret

To understand how Takashi Kotezawa accumulated initial wealth of 100 million yen from his initial small capital, we must consider his contrarian investment strategy practiced between 2000 and 2003.

During that period, the global internet bubble burst, affecting the entire market, and the Japanese stock market also fell into a long-term downtrend, causing numerous investors to suffer significant losses and creating a pessimistic market sentiment. However, Takashi Kotezawa keenly noticed that even in a bear market, stock prices would not consistently decline to the bottom; often, a rebound opportunity would arise in extreme despair. His core insight was that asset prices often significantly deviate from their true value in such extreme environments.

He employed a simple yet effective tool—the 25-day moving average divergence rate for stock selection. This indicator has a straightforward meaning: it reflects the extent to which the current stock price deviates from the 25-day average. For example, if a stock’s 25-day average is 100 yen and the current stock price drops to 80 yen, then the divergence rate is -20%, indicating the stock price is 20 yen lower than the average. When this negative value is sufficiently large, it suggests that the price may be severely undervalued. Takashi Kotezawa decisively built positions at such times, waiting for the market to self-correct and for prices to rebound.

Conversely, if the stock price rises to 120 yen, and the divergence rate becomes +20%, this warns traders to be cautious of the risks brought by excessive speculation in the short term. It is worth mentioning that different stocks and industries have different standards for evaluating the divergence rate. Takashi Kotezawa flexibly sets respective reference benchmarks based on the characteristics of large-cap stocks, small-cap stocks, and various industries.

Strategy Upgrade in Market Turning Points

By 2003, with the progress of domestic reforms in Japan and the recovery of the global economy, the stock market entered an upward trend. With changes in the external environment, Takashi Kotezawa’s trading methodology also underwent significant transformation. This strategic adjustment led to his wealth skyrocketing from 100 million yen to 8 billion yen.

His new approach was to be adept at “picking up bargains” during market stagnation and switch to closely following market trends when the environment warmed. During this period, he began to extensively use short-term trading strategies, typically holding positions for 2 days and 1 night while managing 20-50 stocks simultaneously. Although this diversified layout may seem complex, it is, in fact, a clever risk management method—avoiding concentration of funds on a single asset, thereby diluting the impact of individual losses through synchronous long positions.

In practical implementation, Takashi Kotezawa would hold stocks purchased that day until the next morning’s trading session, then immediately execute profit-taking or stop-loss actions, swiftly adjusting the portfolio to new opportunities. He maintained a very strict discipline in executing this process, forming an efficient trading cycle.

What is noteworthy is Takashi Kotezawa’s proficiency in applying inter-industry linkage effects. For instance, he would focus on stocks in an industry where development was uneven—if one of the four leading companies in the steel sector had already started to rise, he would turn to the other three peers that had not yet followed suit, purchasing lagging stocks that met technical and fundamental criteria, thereby riding the upward trend of the entire sector.

CIS’s Trend Following Trading Philosophy Supplement

In contrast, although CIS does not have the systematic methodologies like Takashi Kotezawa, the trend-following trading principles he summarized and distilled strongly complement Takashi Kotezawa’s strategic thoughts.

CIS’s core viewpoint is quite simple yet powerful: when stocks are continuously rising, they are likely to continue rising; when stocks are continuously falling, they are likely to continue falling. Most of his trading decisions are based on this simple yet profound market rule. This understanding directly addresses the essence of the problem—markets exhibit strong persistence, rather than the probabilistic games that people intuitively imagine.

Many new traders view stock price fluctuations as a 50-50 probability event, believing that after a prolonged rise, a drop is due; this is a dangerous illusion. The true market logic is the exact opposite: when a stock shows strength, it attracts more funds, making the strong stronger and the weak weaker. The correct attitude is to follow the market’s forces rather than oppose them.

This concept extends to a common trading trap—waiting for a pullback to re-enter. Many people feel itchy when they see stock prices soaring, fearing that chasing the highs would leave them stuck at the top, so they choose to wait for a brief adjustment before taking action. The problem is that this “better price point” may never appear, especially in a strong bull market, waiting often leads to missing the entire wave of movement.

Another deadly mistake corresponding to this is averaging down on losses. Once a purchased stock starts to decline, the most rational action is to cut losses and exit promptly; however, the logic of averaging down on losses is entirely the opposite—putting more chips on a failed bet, which often results in losses snowballing.

The Ultimate Wisdom of Trading and Risk Management

Both trading masters share a profound understanding: do not blindly trust certain past successful “golden rules.” The market is a highly complex dynamic system, and any rule, once widely known and applied, will rapidly lose its effectiveness. Truly exceptional traders need to possess independent thinking abilities and keen market perception.

Historically, the greatest traders often emerge during significant stock disasters, financial crises, or drastic market turning points. When most people fall into extreme panic and confusion, the market releases unprecedented volatility. Within this intense volatility lies the richest trading opportunities—only those who can maintain calm judgment and dare to take decisive action can stand out in chaos.

Finally, it is essential to emphasize that losses and risks exist inevitably in the market. The key is not to avoid failure itself but to learn to cut losses timely, achieving small losses and large gains. This is precisely the fundamental reason why Takashi Kotezawa and CIS can maintain long-term stable profits.

Investing carries risks, and trading requires caution. The market is the best teacher, but it also requires sufficient respect.