BNF The Japanese Day Trading Legend 🏯

Hey Pip Surfers! We aim to help you get smarter about your trading in 5-minute reads.

What’s on the agenda today:

• BNF the Japanese Day Trading Legend 📈

• Keyaways from BNF and his trading strategy 🗝️

BNF

BNF, or if you prefer Takashi Kotegawa. The bedroom day trader, who made one of the biggest trades by a retail trader ever……$13 million in one trade, got fame from this very trade on Jcom and in 8 years turned his $13,600 investment into a whopping $153 million, now that is ROI.

Like most, BNF didn’t come from money and his family didn’t come from a trading background either. He caught the bug in 1998 when he was watching live television on a network named NHK in Japan. They were airing a four-part series about the world of finance, the first episode titled: The Man Who Lost 50 Million. It covered the story of the hedge fund manager Victor Niederhoffer, with his fund trading options and index futures. BNF actually derived his name from Victor as in Japanese it is; Bi-Ku-ta Ni-da-hoFfa.
At the time BNF was a broke college student who knew he needed to acquire capital to pursue his newfound path. To make matters more difficult, back in the late 90’s there was very little information on trading, the odds were stacked against him. He got to work during college saving up as much as he could, getting extra shifts, and spending as much time as he could learning and studying the trading craft. He focused on learning how the top stocks in the Nikkei index moved, due to the lack of information he had to come up with his own strategy and approach to the market.
After 2 years he saved up $16,000 and it was now time to face the markets….. Young, hungry, and ready he went all in. In the year 2000, the dotcom bubble was the main event and Japan had just gone through what was called the lost decade, and now he faced an unforgiving bear market. At first, suffering initial losses, but he kept persisting as he trusted his strategy. He was a contrarian trader, making money on the short-term recovery and bounces found in bear markets. He lived off of fear in the markets, focusing on the moving average divergence using the 25-day MA. Analyzing his losers and adjusting deviations in the divergence per sector he traded, he began to gain some ground.
His strategy for a bear market;
Service Sector- 22%-30% divergence off the 25-day MA
Post Dot-com crash and IT stocks range- 25%- 45%
Emerging stocks- 28%-60%
He needed to get a feel for each sector before placing a trade, analyzing if his strategy would work in that sector of stocks.
During the bear markets of the early 2000’s he turned that account from $16,000 to $ 1,000,000….. he had become the great bear of Japanese Day Traders.

What followed the bear run, well you guessed it, a bull run; normally this would be good news but for BNF it meant he couldn’t execute his strategy and he had to come up with a whole new plan. Through his understanding of the fear sentiment in a bear run, he flipped the switch and began to understand the importance of bullish sentiment and what it entails. He mixed this with his knowledge of co-dependency in the Japanese market; he would wait for the Nikkei to rise and then buy the lagging stocks in the index. However, these were few and far between and he was down to only making a few trades per month. Maintaining profitability he increased his account value to $10,000,000 in 2 years. Something else was brewing at the time, a trade that would give him legendary status, the Jcom trade. The trade was based on an employee error who was instructed to sell 1 share of Jcom at ¥610,000, instead, he sold 610,000 shares at ¥1…… after this went live there was no stopping it. BNF bought 701,000 shares at the limit down price and now owned 49% of Jcom. He held 6,000 shares overnight and after having to agree to a settlement he cleared over ¥2,000,000,000… insane.
BNF was never motivated to live a high society life, the money didn’t change him, he just wanted the next trade; he is obsessed with the art of trading. One of BNF’s largest losses was during the 2008 financial crisis when he placed a $6,500,000 bet on the Lehman Brothers recovery, but the bank failed and he lost the whole trade. Since that day he vouched to not trade the US markets again. After this loss, he continued taking hits and his deviations from the earlier bear market were not performing as he expected, but instead of self-doubt, he doubled down on his strategy accumulating positions in over 90 companies with a total exposure of $64,800,000. He raked in a profit of over $12,000,000 and was back on his game. Since then he began diversifying and investing in commercial real estate and is on his way to breaking new limits as a retail trader.

Key Takeaways from BNF’s Trading Style

• Remaining calm, during his career remaining calm is something he elaborates on especially when trading with such large positions.

• Sticking to your strategy is key to long-term trading success, if you chop and change the likelihood of your success is minimal.

• When you have trades that you consider A+ set-ups, increase the position size of this trade as it is more likely to be a winner.

• Understanding market sentiment; is probably one of the hardest things to grasp fully in trading as this requires years of experience to get a feel for what you are trading.

• Know what you are trading. This may sound obvious, but do you really understand all the ins and outs of the instruments you trade and what the underlying fundamentals of each asset are?

• Have no fear, the markets can’t kill you. Don’t be afraid to place a trade to the fact you may lose money. Push your focus to the art of trading and the refinement of your strategy, and the money will follow.