Takakazu Kotegawa CIS's Trading Secrets: How to Seize Market Momentum in Line with the Trend

Japanese stock market history has seen many legendary traders, among whom the brightest stars are none other than Takashi Kotegawa and CIS. Takashi Kotegawa is world-famous by his alias BNF and is revered as the “God of Trading,” while CIS earned the title of “Strongest Retail Trader” through his outstanding ability to trade as an individual investor. The life trajectories of these two trading masters are astonishingly similar: both started engaging in securities trading during college, gradually accumulated wealth from a modest initial capital, and eventually became operators managing billions of dollars; even more legendary is that they both made a splash during the same historic event.

The 2005 J-COM order misplacement incident became a classic case in the Japanese stock market. On that day, CIS, with his keen market intuition and decisive execution, made a profit of 600 million yen in a single move. Takashi Kotegawa’s performance was even more astonishing—he profited 2 billion yen in just 10 minutes amid the market chaos, roughly equivalent to 150 million RMB at the time’s exchange rate. This event catapulted both into fame within Japan’s relatively low-profile trading circles.

From Contrarian to Trend Following: The Evolution of Takashi Kotegawa’s Strategy

Takashi Kotegawa’s trading career was not smooth sailing from the start. In his early capital accumulation phase, he employed contrarian investment strategies, which helped him grow his account from zero to 100 million yen.

Between 2000 and 2003, the bursting of the internet bubble triggered a global stock market crisis, and Japan’s market also fell into a prolonged bear market. In this pessimistic environment, most investors chose to stay away, but Kotegawa saw what others did not—seriously undervalued investment opportunities. He realized that even in a declining market, asset prices could deviate significantly from their intrinsic value due to extreme pessimism. This price deviation is like a stretched spring, containing enormous rebound potential.

25-Day Divergence Rate Stock Selection Method: How Kotegawa Profited in a Bear Market

The core tool Kotegawa used in contrarian investing was the 25-day moving average divergence rate. This seemingly simple indicator can accurately capture abnormal price fluctuations.

Specifically, when a stock’s 25-day moving average is 100 yen, and the current price drops to 80 yen, the divergence rate is -20%. Kotegawa believed that when the divergence rate shows a large negative value, it often indicates the price is severely undervalued, making it an ideal entry point. Conversely, if the price rises to 120 yen, with a divergence rate of +20%, it suggests the price is temporarily overbought, and investors should be cautious of potential pullbacks caused by overheated buying.

Different stocks and industries have distinct characteristics, and Kotegawa is well aware of this. He sets different divergence thresholds for large-cap stocks, small-cap stocks, and various sectors. For example, a -15% divergence in a large blue-chip stock might already be an extreme, whereas a small innovative stock might need a -25% divergence to be considered truly undervalued. This fine-tuned parameter setting is a key reason he stands out among many traders.

Diversified Positions and the Link with Rallied Stocks: The Art of Short-term Trading

In 2003, Japan’s economy began to recover, and the stock market shifted from a bear to a bull. Kotegawa promptly adjusted his strategy—abandoning the low-profile contrarian approach and shifting to a trend-following, aggressive stance. This transition yielded remarkable results: his capital skyrocketed from 100 million yen to 8 billion yen, an 80-fold increase.

During the bull market, Kotegawa adopted high-frequency short-term strategies. His typical operation was a “two days and one night” trade—buy stocks on the day, hold overnight, and then take profits or cut losses in the morning, immediately switching to a new batch of targets. Although this cycle was very short, it was highly effective in the market environment of that time.

He would hold 20-50 stocks simultaneously, which might seem risky but was a carefully considered diversification strategy. By holding multiple stocks rather than concentrating all funds in a single position, he effectively reduced the risk of a single failure. Even if one stock underperformed, it wouldn’t devastate his entire account.

Kotegawa also possesses a unique ability to accurately capture industry linkages. For example, when one of the four major steel industry giants begins to strengthen, he quickly shifts his focus to other industry peers that have yet to rally. He selectively buys these lagging stocks, aiming to ride the entire industry’s upward wave for higher gains. The brilliance of this strategy lies in combining fundamental industry insights with technical sensitivity.

The Principle of Market Continuity: CIS’s Deep Explanation of Trend Following

If Kotegawa provides specific operational methods, CIS offers a more fundamental explanation of the principle behind trend following. CIS does not rely on complex formulas or cumbersome parameters, but his core insight into trend principles provides strong theoretical support for Kotegawa’s strategies.

CIS’s core insight is straightforward: in most cases, stocks that are rising will continue to rise, and stocks that are falling will continue to decline. This seemingly obvious judgment is often misunderstood by many traders.

Many investors fall into the trap of viewing market fluctuations as a 50-50 probability game, believing that upward and downward movements are equally likely. When a stock rises consecutively, they instinctively think, “It’s about to fall now.” But the actual market logic is quite different—stock prices have strong persistence.

When a stock performs strongly, it attracts continuous inflows of investment funds. This money effect creates a positive feedback loop: strong stocks become even stronger due to institutional and retail chasing, while weak stocks weaken further under increased selling pressure. The market operates on the principle of “the strong get stronger, the weak get weaker,” not mean reversion.

A true trading master’s job is to follow this market force rather than oppose it. CIS emphasizes that the mindset of “buying on dips” must be abandoned. When a stock is in a strong upward phase, many fear being caught at the top and wait for a brief pullback before entering. But in a bull market, this “perfect entry” waiting often causes missed opportunities for the entire rally. From the 2003 Japan market reversal and recent global asset performances, this principle applies across all market cycles.

Stop-loss Is Better Than Adding Positions: Five Critical Mistakes Traders Must Avoid

CIS sharply criticizes common misconceptions in trading practice. One of the deadliest mistakes is averaging down on losing positions.

When a stock you initially bought starts to decline, the most rational approach is to admit the trade has failed and cut losses quickly. However, many traders instinctively do the opposite—they increase their position, hoping to “lower the average cost” and turn the situation around. This logic is often disastrous, as doubling down on a proven losing trade only amplifies losses exponentially.

CIS advocates that traders should not obsess over win rate statistics. In long-term trading, the most important metric is the overall profit curve of the account, not the win-loss ratio in a single month or period. Losses in the market are inevitable and unavoidable; the difference between excellent and average traders lies in how well they control the size of losses. Small losses and big wins are the sustainable path to profitability.

Beware of Rule Failures: Adapting to Changing Market Conditions

Both legendary traders issue the same warning to practitioners: do not sanctify any past trading rules.

Markets are highly complex, constantly evolving dynamic systems. When a trading rule or technical indicator becomes widely known and accepted, it often quickly loses effectiveness. This is because market participants adapt to these rules, eroding the inefficiencies they rely on.

The reason Kotegawa and CIS can maintain their trading edge over the long term is their independent thinking and keen market observation. During times of crisis and extreme market panic, it is precisely those who can analyze calmly and make decisive decisions that stand out. Major stock crashes, economic crises, and structural shifts are the crucibles that forge true trading masters.

Kotegawa learned the essence of value investing from the internet bubble burst and harnessed trend power during economic recovery. This adaptability and flexibility are the fundamental guarantees of sustainable profitability.