Takashi Kozakawa and CIS Trading Legend: The Wealth Code from Reversal to Trend Following

Among Japan’s stock market legends, the stories of two trading geniuses are repeatedly referenced by market participants. One is BNF, renowned as the “God of Trading,” and the other is CIS, honored as the “Strongest Retail Investor.” Their commonalities go far beyond that—they both started engaging with the trading market during university, beginning with limited capital, and after years of accumulation and refinement, eventually became traders managing hundreds of millions of yen. What’s most impressive is that they both rose to fame through a famous market accident.

That was the J-COM order mistake event in December 2005. On that day, CIS made a 600 million yen profit with his keen market instincts, while BNF, in less than 10 minutes, executed a lightning-fast operation earning 2 billion yen, roughly equivalent to 150 million RMB at the time. In Japan’s traditionally low-profile and cautious trading circles, traders rarely disclose their trading ideas and methods publicly, but Takashi Koyagawa surprisingly released a systematic trend-following trading strategy, and CIS shared his verified trend-following principles. These trading insights were later organized and studied by many market participants, becoming a trading methodology still applicable today.

Takashi Koyagawa’s Contrarian Investing: From Bottom-Fishing to Billion-Yen Assets

To understand why BNF later became a master of trend-following, we must look back at his early trading career. Between 2000 and 2003, the burst of the global internet bubble triggered a chain reaction that swept through the Japanese stock market. During that period, the market was in a prolonged downtrend, investor sentiment was pessimistic, and many suffered heavy losses. Yet, even in such a bear market environment, markets do not decline in a straight line—extreme despair often gives birth to rebounds, with prices forming wave-like movements through repeated bounces.

Koyagawa’s unique insight was his contrarian thinking. He recognized that during this period, asset prices often deviated significantly from their true value. His strategy was to find stocks that were severely undervalued and to seize opportunities during rebounds after sharp declines. This approach requires strong mental resilience and patience—daring to act when the market is most pessimistic, and dedicating substantial time to fundamental research.

Koyagawa mainly used the deviation of the 25-day moving average (MA) to select stocks. This indicator measures how far the current stock price deviates from its 25-day average. For example, if a stock’s 25-day MA is 100 yen, but the current price drops to 80 yen, the deviation rate is -20%. When the deviation is significantly negative, it may indicate excessive selling, signaling a potential entry point. Conversely, if the price is well above the average (around +20%), it warrants caution due to short-term overheating and possible correction.

It’s important to note that different stocks and sectors have different standards for deviation. Large blue-chip stocks, small growth stocks, and various industry sectors each have their own characteristics. Koyagawa adjusts his deviation thresholds accordingly, using them as precise entry signals. This meticulous methodology allowed him to steadily accumulate during the contrarian cycle, eventually growing his account from initial capital to 100 million yen.

Riding the Trend: From Bottom Rebound to 8 Billion Yen in Assets

2003 marked a crucial turning point. With Japan’s reform policies advancing and the global economy gradually recovering, the Japanese stock market entered a new upward cycle. Facing this fundamental change, Koyagawa made a major adjustment to his trading strategy—this shift directly led his assets from 100 million yen to 8 billion, demonstrating the importance of strategy adaptation.

From this period onward, BNF adopted a more aggressive trend-following approach, aligning with the market’s long-term upward trend. He favored a short-term trading style of holding positions for about two days, often managing 20 to 50 different stocks within a single trading day. While this multi-stock long position approach may seem aggressive, it is actually a sophisticated risk management design—diversifying capital across many stocks effectively reduces the impact of any single position, keeping potential losses within acceptable limits.

His trading process follows strict discipline: stocks bought on the day are held until the next day’s open, then, based on profit or loss, he takes profits or cuts losses during the early trading hours, quickly switching to a new set of selected stocks. This efficient cycle ensures continuous capital activity and risk control.

Koyagawa also demonstrates a deep understanding of market correlations. He is especially skilled at leveraging sector linkages, particularly targeting lagging stocks within industries. For example, in the steel industry’s four major leaders, when one begins to rise, he does not blindly follow the already-started stock but shifts focus to the other three that have yet to rally, seeking entry points in these lagging stocks to ride the entire industry’s upward wave with relatively lower risk.

CIS’s Trend-Following Principles: Simple Yet Powerful Trading Philosophy

Compared to Koyagawa’s detailed methodology, CIS’s trading approach reflects a different kind of wisdom—one not based on complex quantitative indicators but on a profound understanding of market fundamental movement laws. CIS’s trend-following principles serve as a perfect theoretical complement to Koyagawa’s trend-following strategies.

CIS’s core insight is straightforward: most of the time, stocks that are rising will continue to strengthen, and those that are falling will continue to weaken. His trading operations are largely built on this premise. This seemingly simple judgment touches on the fundamental law of market movement.

In markets, many participants unconsciously interpret stock price fluctuations as a 50/50 probability event, as if stocks “should” retrace after rising to a certain extent. But in reality, the market does not maintain such symmetrical equilibrium—instead, it exhibits strong trend persistence. When a stock performs well and attracts continuous capital inflows, the strong get stronger, and the weak get weaker. This feedback mechanism continually reinforces itself. Our task is not to fight this powerful force but to follow and adapt to the market’s rhythm.

CIS emphasizes abandoning the “buy on dips” mindset. Many traders, seeing a strong stock rise, fear being caught at a high point and wait for a short-term correction before entering. But the problem is, no one can accurately predict when that correction will happen—during a bullish rally, waiting often means missing the entire move. This is why many conservative traders miss out on substantial gains.

Key Points of Risk Management: Stop-Loss Discipline and Psychological Resilience

Contrary to trend-following, there is another approach called “averaging down on losses.” CIS explicitly rejects this practice. He believes that once a stock’s price drops after purchase, the wisest move is to admit the trade’s failure and decisively cut losses. Averaging down on a losing position only deepens losses.

In pursuit of profits, traders should not obsess over win rate, because what matters is the final account return. A successful trading system is often characterized not by high win rates but by “small losses and big wins,” resulting in positive net gains.

Both CIS and Koyagawa deeply understand that risk and losses are inevitable in markets. What traders truly need is not to completely avoid failure but to learn how to handle it efficiently—cut losses promptly and keep individual losses within acceptable bounds. This rational attitude toward risk often distinguishes ordinary traders from top experts.

Opportunities and Challenges in Market Evolution

CIS issues an important warning to all traders: do not blindly trust “golden rules” that once worked. Markets are complex and dynamic systems. Once a rule becomes widely known and accepted, it tends to lose effectiveness quickly. This is because market participants adjust their trades based on known rules, rendering those rules obsolete. Truly skilled traders need unique perspectives and sharp judgment, not mechanical adherence to dogma.

Interestingly, many of the greatest traders emerge during the darkest times—major crashes, deep economic crises, or critical market turning points. It is precisely in these moments, when most are engulfed in confusion and extreme panic, that markets unleash the most violent volatility. The larger the volatility, the richer the hidden opportunities. Those who can stay calm and make decisive decisions amid extreme conditions often stand out as top traders. This is the mechanism that allowed legends like Koyagawa and CIS to shine.

The trading market is always fraught with risks; participation requires caution. May the trading philosophies of these market legends inspire you.