Takashi Kotegawa is a Japanese day trader famous for turning $13,600 into $153 million in eight years (2000 – 2008). A crazy 12,000x return on investment that could rival gains from investing early into Bitcoin!
In the media Kotegawa is portrayed as socially awkward, didn’t spend much money and barely left his house. Known online as “BNF”, he sprung into the spotlight in 2005. He made $17 million on a trade when an employee at Mizuho Securities misplaced a sell order. Instead of selling one share of J-COM Holdings for 610,000 Yen, he sold 610,000 shares for one Yen each!
The screen flashed an error message but the trader made the stupid mistake of ignoring it as warning messages were common. It took a couple of minutes for the trader to recognize the mistake and frantically tried to cancel the order but failed. The order went through because of a bug in the Tokyo Stock Exchange system. Nonsensical orders such as this should never go through.
The sell order caused volatile price action on J-COM’s stock that Kotegawa noticed, he took a risk and bought 7100 shares – a 49% stake in the business. The stock price skyrocketed and Kotegawa’s gamble paid off handsomely! Some banks returned returned their profits on the trade to Mizuho Securities but other retail traders such as Takashi were not as generous. He later settled with Mizuho and sold his shares at a huge profit.
After the fiasco BNF became a celebrity figure in Japan. He was interviewed by all the major media outlets and appeared on a number of shows over the following four years. In late 2009 he disappeared from the spotlight completely, it’s impossible to even find a recent photo of him.
Takashi Kotegawa’s estimated net worth is $1.8 billion! A reserved character who lives a simple life, Kotegawa now keeps a low profile and doesn’t do any media interviews. He shifted most of his focus to real estate investing so he could spend more time with his wife and kids. Last time he was in the news was April 2018, he sold an office building in front of Akihabara station in Tokyo for $110 million.
Takashi’s trading style was very analytical and he was able to make money whether the market was going up or down. His trading career began during the bear markets of 2001 and 2002 and believed it’s easier to profit in a bear market by betting on short-term rebound patterns.
“When going for a short-term rebound what it should be focusing on is moving average divergence. Naturally, the greater the degree of divergence, the greater the odds the stock goes back up but the threshold for a good buy depends a great deal on prevailing market conditions.”
“In the bear market of 2001 and 2002, I would only look at stocks at least 20% below the 25 day
moving average. 35% being a somewhat safe level to buy at. The price would then surge at which point I’d close the position at a profit.”
“At this stage the divergence would narrow from say 35% to 15%. But after a while it would once again fall 30 plus below the moving average restarting the cycle. The thing is though this dynamic started changing around the latter half of last year (referring to 2003) with stocks a mere 15% below the 25-day moving average rebounding right away.”
“Now that I think about it, recently there haven’t even really been that many opportunities to make use of this moving average divergence strategy to begin with.”
“Rebound levels are highly sensitive to prevailing market sentiment, so finding the right threshold requires a bit of a judgment call from traders. You can’t treat all stocks the same based solely on the divergence numbers. First you need to develop a field for each sector’s general dynamics.”
Stocks in certain industries are prone to diverge more strongly from their 25-day moving average. You should therefore be more prudent in determining at what level to buy. Other stocks tend to rebound more quickly meaning you can be more adventurous with those.
BNF ‘s ability to process and derive insights from large amounts gave him an edge in the market. In 2007, he would be holding 30-70 positions at once and maintained a mental image of the price charts for around 600 to 700 securities. He must have a photographic memory!
During bull markets BNF would change the strategy and adapt to the market. The quotes below are taken from an interview in 2006.
“Stocks work in mysterious ways, going up and down based not on fundamentals but rather, on price action in the US and Futures markets and on overall market sentiment”
(Using steel companies as an example).
“When the market’s strong, the core companies in the sector tend to rise in tandem with the index.”
There’s a pattern to this dynamic, let’s say one or more of Nippon Steel, Kobe Steel and JFE Holdings start rising in tandem with the Nikkei 225 index.
“These core companies don’t go up instantaneously all at the same time. As usually one or more ends up lagging the others. That’s a good time to place your bid. You learn to spot these opportunities over time after watching day in and day out price movements across a wide range of companies.”
BNF believes his success didn’t come from skill but rather he was a “product of the times,everything comes down to the prevailing market environment”. Sounds like a very modest guy!
The legend of Takashi Kotegawa deserves to be known worldwide and hopefully one day he will make a big comeback. Sadly, Kotegawa will probably remain in the shadows.