Takakazu Kotegawa CIS's Winning Strategy: Evolving from Contrarian to Trend-Following Trading

Two legendary figures have emerged in Japan’s trading circle: one is the so-called “God of Trading,” Takashi Kotegawa (BNF), and the other is renowned as the “Strongest Retail Investor,” CIS. They are not only longtime friends but also share remarkably similar starting points and turning points in their trading careers. Both entered the trading world during college, starting with just a few million yen and gradually accumulating to hundreds of millions, even billions, of yen. They also both made their mark during a historic moment—the 2005 J-COM order mistake incident—marking their “breakout” into fame.

That day, CIS made 600 million yen, while Takashi Kotegawa earned 2 billion yen in just 10 minutes, roughly equivalent to 150 million RMB at the time exchange rate. In Japan’s traditionally low-profile and conservative market, traders rarely reveal their trading secrets voluntarily. But Kotegawa Takashi surprisingly shared a complete trend-following trading system, and CIS contributed his years of practical trading principles. These two methodologies have since been studied and applied by many traders and remain highly valuable references today.

Takashi Kotegawa’s Path to Wealth: The 25-Day Moving Average Divergence Strategy

To understand how Takashi Kotegawa skyrocketed from 100 million yen to 8 billion yen, one must first grasp his early contrarian investment logic. During 2000–2003, the internet bubble had just burst, and global stock markets entered a prolonged bear market. The Japanese market was no exception; investors suffered huge losses, and market sentiment was extremely pessimistic.

But Kotegawa discovered a phenomenon overlooked by most: even in a sustained downtrend, prices do not fall straight to the bottom. On the contrary, markets tend to rebound in despair, creating wave after wave of trading opportunities. He realized that at the bottom of a bear market, many quality assets are severely undervalued, trading well below their intrinsic value.

His core strategy revolves around the “25-day moving average divergence rate” indicator. Simply put, divergence rate measures how far the stock price deviates from its moving average. For example, if a stock’s 25-day moving average is 100 yen, and the current price is only 80 yen, the divergence rate is -20%. When the divergence rate becomes significantly negative, it indicates the stock is seriously undervalued—an entry signal. Conversely, when the divergence reaches +20%, it suggests the short-term buying frenzy has driven prices too high, signaling risk.

It’s important to note that different stocks and sectors react differently to divergence signals. Large-cap blue chips, small- and mid-cap stocks, and various industry sectors require setting tailored divergence thresholds. Kotegawa fine-tuned these thresholds to serve as precise entry signals, profiting from rebounds when assets are undervalued.

From Bear Market Bargain Hunting to Bull Market Takeoff: Kotegawa’s Strategy Evolution

2003 marked a turning point for Japan’s stock market. Reforms and global economic recovery changed the environment fundamentally, ushering in a sustained upward cycle. As the market shifted, Kotegawa’s trading strategy evolved—from contrarian bets to trend-following momentum trades—leading to exponential growth in his capital.

Under this new framework, he developed a unique short-term trading style. He often engaged in “two-day overnight” swing trades, holding 20 to 50 stocks simultaneously within a single day. The advantage was clear: by diversifying holdings extensively, he minimized risk associated with any single stock. He would buy stocks and hold them overnight, then quickly sell in the morning—regardless of profit or loss—and swiftly move to new opportunities.

Besides managing large portfolios, Kotegawa was adept at exploiting “industry linkage effects.” He paid close attention to “stagnant stocks” within sectors—when industry leaders started rising, he would quickly shift into other stocks in the same sector that had yet to move. For example, in the steel industry’s four major listed companies, once one began to strengthen, he would preemptively position in the other three, riding the wave of the entire sector’s ascent.

Following Market Momentum: CIS’s Trend-Following Wisdom

Compared to Kotegawa’s detailed indicator system, CIS’s approach is more straightforward but equally profound. He avoids complex formulas, distilling trend-following into a core insight: stocks that are rising tend to continue rising; stocks that are falling tend to continue falling. Most of his trading decisions are based on this simple yet deep observation.

Many retail investors fall into a misconception: they see stock movements as a “50-50” symmetry—when a stock rises consecutively, they instinctively think “it’s about to fall.” But market logic is quite different. Markets exhibit strong trend persistence rather than balance. When a stock performs well, it attracts more capital and investor attention; the strong get stronger, the weak get weaker—that’s the market’s power.

CIS advises retail traders: accept the market’s momentum rather than fight it. This means abandoning the seemingly clever but risky habit of “buying on dips.” Many see a temporary pullback in a strong stock and rush to buy, fearing to miss the top. But no one knows exactly when a correction will happen. In a true bull market, waiting for a dip often results in missing the entire rally. Instead of trying to precisely time short-term fluctuations, it’s better to follow the overall trend.

Stop-Loss Over Stop-Profit: The Risk Philosophy of Top Traders

Both Kotegawa and CIS emphasize the same core principle: quickly cutting losses is more important than chasing high win rates. When a stock you own starts to decline, the best move is to admit the mistake and exit promptly. The opposite—“adding to losing positions”—can turn small errors into major disasters.

In trading, win rate is not the most critical metric. What truly matters is overall account profitability and maintaining rationality during losses. Losses are inevitable; risk is everywhere. An excellent trader is not one who never loses but one who can cut losses swiftly and decisively—keeping each loss within manageable limits while letting profitable positions run. This embodies the essence of “small losses, big gains.”

CIS also warns all traders: do not blindly trust any so-called universal trading rule. Markets are complex, dynamic systems. When a widely circulated “golden rule” is applied on a large scale, it quickly becomes ineffective. True trading skill comes from unique insights and sharp market perception.

Opportunities Born from Crises: The Final Lesson from Top Traders

Both Kotegawa and CIS have transformed during major market crashes and turning points. When most investors are overwhelmed with panic and fear, markets tend to produce the greatest volatility. The more intense the fluctuations, the richer the hidden opportunities. Those who can stay calm and act decisively at these critical moments are often the ultimate winners.

Their stories teach us: there are no eternal strategies in markets—only the ability to adapt continuously. Kotegawa shifted from contrarian to trend-following, while CIS always adhered to the core belief in market momentum—they evolved through changing environments.

Trading requires rationality; risk demands respect. But opportunities favor those who are well-prepared and decisive.