Kohide Ogasawara's Trading Journey: Strategic Evolution from Contrarian to Trend-Following

Among the legends of Japan’s capital markets, the stories of Takashi Kotegawa (nicknamed BNF) and CIS are truly remarkable. Both started engaging in stock trading during university, relying on their unique trading philosophies to gradually build their small capital into billion-yen empires. They are not only lifelong friends but also became famous after the 2005 J-COM order mistake incident, turning into legends in Japan’s trading circles.

The Rise of Japan’s Trading God Takashi Kotegawa

Takashi Kotegawa is renowned as the “God of Trading,” but his success didn’t happen overnight. During the internet bubble period (2000–2003), global stock markets entered a bear market, and the Japanese market was no exception. Many investors suffered significant losses during this crisis, and market sentiment was extremely pessimistic. However, Kotegawa sensed opportunities amid the turmoil.

He realized that even in a bear market, stock prices often deviate significantly from their intrinsic value. Many high-quality companies’ stocks were ruthlessly sold off, falling well below their true worth. This extreme market sentiment created a golden opportunity for forward-looking investors to pick up bargains. Through contrarian investing during this period, Kotegawa gradually grew his capital from a few million yen to 100 million yen, laying the foundation for later huge gains.

The Divergence Rate Stock Selection Method: Kotegawa’s Contrarian Investment Secret

Kotegawa pioneered a systematic approach to contrarian investing, centered around the 25-day moving average divergence rate. This indicator helps identify stocks that have been excessively sold off by the market.

Simply put, the divergence rate reflects how far the current stock price deviates from its 25-day moving average. For example, if a stock’s 25-day moving average is 100 yen, and the current price drops to 80 yen, the divergence rate is -20%. A large negative divergence often indicates the stock is severely undervalued. Conversely, if the price is 120 yen with a divergence rate of +20%, it signals potential overbought risk.

Different stocks and industries have varying sensitivities to the divergence rate. Large-cap stocks, small- and mid-cap stocks, and different sectors all influence the baseline. Kotegawa carefully set reference standards based on these differences, allowing this method to adapt to complex and changing market environments. This meticulous approach reflects his deep understanding of market laws.

Trend Following: The Key to Kotegawa’s Asset Explosion

By 2003, Japan’s stock market entered an upward cycle driven by economic reforms and global recovery. Facing this fundamental change, Kotegawa adjusted his strategy—from contrarian investing to trend following. This shift was crucial, and his assets skyrocketed from 100 million yen to 8 billion yen, achieving a qualitative leap.

Kotegawa’s trend-following approach features distinct characteristics. First, he focuses on short-term trades, often holding stocks overnight. Each day, he manages 20 to 50 stocks, diversifying holdings to reduce risk from individual stocks. The next morning, he quickly assesses all positions—selling those that should be exited, cutting losses where necessary—and swiftly shifts into new targets. This high-frequency, low-risk operation forms the basis of his steady profits.

He is also skilled at exploiting industry linkages. For example, when a leading steel company begins to rise, he quickly shifts focus to other companies in the sector that haven’t yet moved, buying qualifying lagging stocks. This allows him to participate in the entire industry’s upward trend at a lower cost. This tactic demonstrates his profound insight into market structure and industry relationships.

CIS’s Trend Principle: A Perfect Complement to Kotegawa’s Strategy

While CIS did not develop a detailed method like Kotegawa, his principle of trend following provides a philosophical complement. CIS’s core insight is simple yet profound: stocks that have been rising continuously are likely to keep rising; those that have been falling will likely continue to fall.

This seemingly simple observation touches on the market’s fundamental nature—markets tend to have strong trend persistence. Many retail traders think of stock movements as a 50-50 probability game, expecting a correction after a certain rise. But in reality, the market is the opposite—strong stocks attract more capital and become even stronger, while weak stocks see capital withdrawal and decline further. The principle of “the strong get stronger, the weak get weaker” is an intrinsic market law.

CIS advises traders to follow this force rather than oppose it. Many people habitually buy at high points during a strong bull market, hoping to catch a better entry during dips. But in a bullish trend, this often causes them to miss the entire rally. Instead of gambling on perfect timing, it’s better to follow the trend—entering positions in strong stocks promptly and enjoying the trend’s benefits.

The Contradiction of Stop-Loss and Averaging Down: How to Avoid Falling Into the Trap

CIS also emphasizes a common fatal mistake among traders—averaging down on losing positions. When a stock starts to decline after purchase, the most rational approach is to admit the mistake and cut losses immediately. Averaging down, on the other hand, attempts to lower the average cost by adding more, waiting for a rebound. But this logic is fundamentally flawed: if the original judgment was wrong, increasing the position only magnifies losses exponentially.

True trading wisdom isn’t about chasing high win rates but about ensuring overall account profitability. Losses are inevitable in markets; the key is to keep them within manageable limits. CIS advocates the philosophy of “small losses, big gains”—strictly controlling individual losses while letting profitable trades run—ultimately leading to consistent net gains.

Market Complexity and a Trader’s Self-Discipline

In his career summary, CIS offers a thought-provoking point: don’t overly rely on widely circulated trading “golden rules.” Markets are dynamic and complex systems; any rule that becomes widely known risks being arbitraged away quickly. Truly outstanding traders are often those who can remain calm, make quick decisions during major crises, market crashes, or turning points.

When most people panic and are at a loss, markets produce unprecedented volatility, hiding abundant opportunities. Many legendary traders have emerged precisely during the darkest market times. Kotegawa’s success was also rooted in this—his contrarian investments during the internet bubble burst and his perfect handling of the J-COM incident exemplify his keen insight and execution during crises.

The essence of trading is to contend with human nature and dance with the market. The experiences of Kotegawa and CIS teach us that successful traders need solid methodologies, calm minds, and continuous learning and adaptation to market laws.