Recently, while studying Japanese trading history, I was deeply captivated by stories of two legendary figures. One is BNF, hailed as the god of trading, and the other is CIS, known as the strongest individual investor. These two brothers have been close friends for many years, and their experiences are remarkably similar. Both started trading in college, gradually building their capital from small funds to managing a fund exceeding 1 billion yen, and both gained fame during the famous J-COM order mistake incident. That day, CIS made 600 million yen, but BNF was even more aggressive, earning 2 billion yen in 10 minutes, roughly equivalent to 150 million RMB at the time. In Japan’s traditional, low-profile, conservative trading circle, few are willing to openly share their trading ideas, but BNF surprisingly shared a trend-following strategy, and CIS also revealed his practical trend trading principles. Many traders have organized and studied these insights, incorporating them into their own methodologies, which are quite practical in today’s market.

Speaking of BNF trader’s trend-following strategy, one must first mention his early contrarian investment approach, which was the main contributor to growing his account from small to 100 million yen. From 2000 to 2003, the aftershocks of the internet bubble burst were still felt, global stock markets were in a bear market, and Japan’s market was no exception. Many investors suffered heavy losses and were very pessimistic. But the key is, bear markets don’t fall forever; trends often emerge from despair, and prices always rebound after significant declines. BNF recognized this and believed that asset prices at this time often deviate seriously from intrinsic value. By identifying severely undervalued stocks, he aimed to profit from rebounds after big drops. This requires great courage and determination, as well as considerable time spent on in-depth research and analysis.

BNF’s stock selection method mainly involves monitoring the 25-day moving average and targeting stocks with serious negative deviations. For example, if a stock’s 25-day moving average is 100 yen and the current price is 80 yen, the deviation rate is -20%. When such a large negative deviation occurs, it often indicates the price is severely undervalued, so he buys in at this point, waiting for a rebound. Conversely, if the stock is at 120 yen with a +20% deviation, it suggests the price is temporarily overvalued, and caution is needed to avoid getting caught at a high. Different stocks and industries have different reference standards for deviations; large-cap stocks, small-cap stocks, and various sectors each have their own benchmarks, which serve as entry indicators.

By 2003, Japan’s stock market entered an upward trend driven by reforms and global economic recovery. The market environment changed, and BNF trader’s methods also evolved. This shift caused his assets to soar from 100 million yen directly to 8 billion. During the bear market, he focused on bottom-fishing; as the market warmed up, he switched to trend-following, trading in line with the upward momentum. BNF is accustomed to short-term trades lasting two days or overnight, often holding 20 to 50 stocks simultaneously within a single day. This approach helps avoid excessive concentration in one stock, dispersing risk across multiple holdings and greatly reducing the chance of losses. Stocks bought during the day are held overnight, and the next morning, he quickly decides whether to take profits or cut losses, then shifts to new targets, strictly executing this cycle. He is also particularly skilled at leveraging industry linkage effects, especially favoring lagging stocks. For example, among the four major steel industry leaders, if one starts to rise, he shifts focus to the other three that haven’t yet gained, buying qualifying lagging stocks to ride the entire industry’s upward wave.

CIS doesn’t have a very specific method, but his trend trading principles complement BNF trader’s strategy well. CIS believes that most of the time, stocks that are rising will continue to rise, and those that are falling will continue to fall. Most of his trades are based on this premise, which is essentially the core understanding of trend-following. Many traders subconsciously think of stock price movements as a probability game, like a 50-50 chance. When they see a stock rising steadily, they instinctively feel it will turn around. But the stock market itself isn’t a balanced system like that; quite the opposite, it has strong continuity. When a stock performs strongly, it attracts more investors; the strong get stronger, the weak get weaker. We must accept the market’s power rather than oppose it. Similarly, the mindset of buying on dips should be avoided as much as possible. When stocks surge, many fear entering at the high and wait for a small pullback, but no one knows if that opportunity will come. In a strong bull market, such waiting often means missing the entire trend. Trend-following should be combined with timely stop-losses. CIS’s logic is that once you buy a stock and its price starts to decline, the best move is to cut losses quickly. Averaging down on a failed position is the opposite; it’s doubling down on a losing trade, which often leads to bigger losses. Don’t focus too much on win rate; what matters is the overall profit of the account. We must understand that losses and risks are inevitable in the market. Our goal isn’t to avoid failure but to cut losses promptly—it's not that we can’t lose money, but that we minimize losses and maximize profits. He advises traders not to blindly believe in any past golden rules. The market is a complex, dynamic system, and once those so-called rules are widely circulated, they tend to become ineffective quickly. Trading requires a unique perspective and sharp judgment. Truly excellent traders often stand out during major market crashes, economic crises, or turning points. When most people are confused and in extreme panic, the market experiences intense volatility, and the greater the volatility, the more opportunities there are. Those who can stay calm and act decisively at such times will stand out. Well, investing involves risks, and trading should be cautious. Remember to follow for more profitable trading insights. Wishing everyone good morning, good afternoon, good evening, and goodbye.