Kosui Ogashigawa's Trading Wisdom with CIS: The Transformation from Contrarian to Trend-Following

There are two legendary figures highly respected in Japan’s trading community: one is the renowned trading god BNF, whose real name is Takashi Kotegawa; the other is CIS, known for having the strongest retail investor reputation. These top traders have known each other for many years and have experienced many similar pivotal moments in their trading careers. Both started engaging with the capital markets during their university years, gradually accumulating capital from small initial investments, eventually managing over hundreds of millions of yen. Even more legendary is that they both rose to fame during the 2005 J-COM order mistake incident—CIS made a huge profit of 600 million yen that day, while Takashi Kotegawa’s performance was even more astonishing—earning 2 billion yen in just 10 minutes, which at the time was roughly equivalent to 150 million RMB.

In Japan’s typically low-profile and conservative trading circles, top traders rarely openly reveal their trading logic. However, Takashi Kotegawa unusually shared his trend-following strategy framework publicly, and CIS also generously disclosed his most practical trend-trading principles. These two sets of theories were later carefully studied, integrated, and applied by many traders into their own practices. In today’s market environment, these experiences still hold significant reference value.

From Underestimation to Rebound Capture: Takashi Kotegawa’s Contrarian Investment Philosophy

To understand how Takashi Kotegawa ultimately became a top trader, we must start with his early contrarian investment strategies. This was his core method for growing his capital from the initial stages to 100 million yen.

Between 2000 and 2003, global stock markets were shadowed by the burst of the internet bubble. The Japanese market was no exception, suffering heavy losses and filled with pessimism. Yet even in a bear market, prices do not fall straight to the bottom. Market laws show that markets often give birth to new growth amid the deepest despair; prices fluctuate in wave-like patterns during rebounds.

Takashi Kotegawa’s innovation was discovering that in such extreme market conditions, asset prices often deviate significantly. His strategy was to actively search for severely undervalued stocks and precisely enter during rebounds after sharp declines, capturing profits from these movements. This approach required extraordinary courage, firm resolve, and extensive deep research.

He mainly relied on observing the deviation of stocks from their 25-day moving average to select stocks. The deviation rate measures how far a stock’s price is from its short-term average. For example, if a stock’s 25-day moving average is 100 yen and the current price is 80 yen, the price is 20 yen below the 25-day average, so the deviation rate is -20%. When the deviation rate is significantly negative, it usually indicates the stock is severely undervalued, making it a good entry point. Conversely, if the price reaches 120 yen, with a deviation rate of +20%, it suggests the stock may be overvalued in the short term, warning of potential risks from excessive buying.

Takashi Kotegawa also adjusts his deviation thresholds based on the characteristics of different stocks and industries. Large-cap stocks, small-cap stocks, and various sectors have different volatility profiles, so he sets different standards accordingly. This meticulous, context-dependent methodology became a crucial tool in his early capital accumulation.

When the Market Turns: How Trend-Following Strategies Can Skyrocket Assets

2003 marked a critical turning point. With Japan’s deepening reforms and the global economic recovery, the Japanese stock market began an upward trajectory. As the market environment fundamentally changed, Takashi Kotegawa’s trading methods also underwent significant adjustments.

This strategic shift proved astonishing—his assets skyrocketed from 100 million yen to 8 billion yen in a short period, an 80-fold increase. The core of this change was: during market downturns, he focused on low-priced buying; as the market strengthened, he adopted a trend-following approach, riding the upward momentum for trades.

Within this trend-following framework, Takashi Kotegawa developed a habit of short-term trades lasting two days—buy stocks, hold overnight, then decide the next morning whether to take profits or cut losses, quickly switching to new targets. This cycle was strictly followed throughout his trading career.

Long Positions and Catching Stagnation: The Art of Short-Term Diversification

Takashi Kotegawa’s short-term trading is characterized by holding 20 to 50 stocks simultaneously. While this appears to diversify risk, it is actually a sophisticated risk management art. By not concentrating capital in a single stock but spreading it across many, he minimizes the risk of losses from any one position.

Moreover, he is particularly adept at leveraging sector interlinkages to find opportunities. He often focuses on stocks that have not yet surged—stagnant stocks. For example, among the four major steel industry leaders, once one begins to rise, he immediately buys the other three that have yet to move up. This approach allows him to ride the entire industry’s upward wave efficiently, achieving more effective capital allocation.

Surviving in a Bullish Market: CIS’s Trend Principles

While CIS did not develop specific quantitative methods like Takashi Kotegawa, his trend-following principles complement and deepen his strategy framework.

CIS’s core belief is: stocks that are rising tend to continue rising, and stocks that are falling tend to continue falling. Most of his trading decisions are based on this fundamental premise. This understanding of market continuity is the foundation of his trend-following philosophy.

Many ordinary investors see stock movements as a 50-50 probability game—if it goes up, it will go down; if it goes down, it will go up. But the market’s reality is far more complex. Stocks with strong momentum attract more capital, becoming stronger, while weak stocks weaken further. This reflects the true force of the market. Our task is to understand and accept this market power, not fight against it.

Under this logic, buying on dips should be approached cautiously. Many traders panic after a sharp rise, fearing to get trapped at the top. They prefer waiting for a short-term correction to buy at a lower price. But no one can predict whether such a correction will occur. In a strong bull market, waiting often results in missing the entire rally.

Stop-Loss vs. Doubling Down: The Key Decision in Trading

Contrary to trend-following, some traders increase their position when facing losses. CIS’s view is clear: when a stock you bought starts to decline, the wisest move is to admit the trade failed and execute a decisive stop-loss. Increasing position size on a losing trade—doubling down—tends to magnify losses in most cases.

In evaluating trades, many overly focus on win rates. CIS emphasizes that what truly matters is the net profit of the entire account. Market risks and losses are unavoidable; the goal is not to avoid failure altogether but to cut losses quickly when they happen, keeping losses within manageable limits. This is the essence of small losses and big gains—accept small setbacks, aim for large profits.

Breaking the Rules: The True Logic of Market Operation

CIS offers a crucial warning to all traders: do not blindly trust those widely circulated “golden rules” of trading that have worked in the past. Markets are complex, constantly evolving systems. Once certain rules become widely accepted and used by market participants, they tend to lose effectiveness. Truly excellent traders need to have unique perspectives and sharp market judgment.

History shows that the best traders often stand out during major crashes, economic crises, or market turning points. When most investors are lost in confusion and panic, and market sentiment hits rock bottom, huge price swings occur. The greater the volatility, the richer the hidden opportunities. Only those who remain rational, calm, and decisive can seize the turning points and achieve wealth leaps. Takashi Kotegawa and CIS thrived in such eras, completing their transformation and growth.