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Legends of Trading (Part 1): From $13,000 to $150 Million!

Every industry, hobby or sport has its legends that should not be forgotten. The same is true for intraday trading - the royal discipline of all traders. That's why we are bringing you a series of articles that will introduce you to traders who have written their skills into the textbooks of trading. Join us for a look at their innovative trading strategies and the resulting successful trades, and find inspiration for your own trading.

Mysterious Trader from Japan - Takashi Kotegawa

Although the name of this mysterious trader from the land of the rising sun may not ring a bell, believe me, he definitely deserves his place among the legends. After all, the title of today's episode should be telling. The achievements of Takashi Kotegawa are so incredible that there is even speculation as to whether he is a man of flesh and blood. This is supported by the fact that this mysterious businessman has virtually no photos available on the internet. So let's take a closer look at the trading history of this intraday genius, conquering the markets from his own bedroom.

Kotegawa didn't linger too long on the demo account and with an initial deposit of 13,600 USD (approx. 340,000 CZK) he started real intraday trading on the Japanese stock markets. From his initial deposit we can deduce that he was not a rich man, because this amount is roughly equivalent to what a large number of traders trade today. However, Kotegawa was more successful than the vast majority of traders - in 8 years of trading he managed to make a profit of $153 million from his initial capital. Needless to say, that similar results are really very rare in such a risk environment as financial markets are. So how did this timid Japanese trader managed to generate such staggering profits from his own bedroom?
 

"Bedroom trader" strategies

Kotegawa began trading on the Japanese stock market around 2001, the time of the dot-com bubble burst that sent virtually the entire world into a bear market. So it's no wonder that he often speculated just on a drop in stock prices. The bear market in question lasted until 2003, and for a better idea is shown by the red arrow on the long-term chart of the Nikkei 225 index below. Speculators on market declines were thus in a harvest in Japan at the time, and Kotegawa took full advantage of this.

Graf č.1: Dlouhodobý vývoj indexu Nikkei 225 z Google Images

Chart 1: Long-term trend of the Nikkei 225 index from Google Images


Unfortunately, there are not many details about the exact strategy of this trader. However, he himself insisted that it is easier to make money during bear markets and then look for short-term pull-backs in stocks. Among the technical indicators, he used bollinger bands, RSI and then made the actual decision to enter the position according to the 25-day moving average. Allegedly, he would buy stocks that were at least 20% below the 25-day moving average and then profit from the short-term growth of the stock. He then closed the trades during the same session, or held part of the position overnight.

Sample trade according to Takashi Kotegawa's strategy

An example of what Kotegawa's strategy might look like is shown in the image below. However, we do not show it on the Japanese stock market, where Kotegawa himself would probably trade, but on the New York Stock Exchange. In the MT4 platform, we see a chart of Alibaba Group Holding (ticker: BABA)'s stock, whose price fell as low as $73.12 during the trading session on March 15, 2022. Chinese companies have been under pressure for some time due to concerns about delisting on the U.S. stock market, which has weighed on Alibaba's share price. To get a better idea of the market, the H4 timeframe is chosen, and Kotegawa himself would presumably then have an open view of the same stock on several different timeframes.
 

Akcie Alibaba na timeframe H4 v platformě MT4 doplněny o RSI (25) a MA (25)

Figure 1: Alibaba shares on H4 timeframe in MT4 platform complemented by RSI (25) and MA (25)


The orange line is the 25-day Moving Average, which at the moment shows a value of 97.73. Thus, the current share price is more than 25% below the average of the last 25 days. However, that alone is not enough to enter the trade. Kotegawa would also watch other technical indicators such as the RSI oscillator to determine oversoldness and trend. He would then probably enter the trade "Long" during the next green H4 candle (purple arrow), which heralded a trend reversal. This is confirmed by the RSI oscillator, whose value of 24 indicates a significant oversold market. Kotegawa would then likely have taken most of the profit before the end of the session and held a smaller portion of the position overnight. Alibaba shares then opened with a gap up significantly.
 

T. Kotegawa's most legendary deal - 400 million in one day

The year was 2005 and Takashi Kotegawa was about to close the most successful deal of his life thanks to the above mentioned strategy. The Japanese company J-Com Holdings had just had its IPO and Takashi Kotegawa was glued to the barricade of monitors in his bedroom all day. That's how he noticed that a trader at the big firm Mizuho Securities had placed a sell order for 610,000 J-Com Holdings shares at 1 yen. However, thus was grave a mistake on the Mizuho Securities trader’s side, as this man originally wanted to sell 1 share for 610 thousand yen. This huge mistake then sent the company's stock into a steep decline. At the bottom, Kotegawa then bought 7,100 shares, and on the subsequent return above, he made $17 million (now over $400 million) on this trade in a single day! This trade earned Kotegawa the nickname "J-Com Man,". As you can see the profit of such astronomical proportions as this one could only be generated thanks to enourmous luck on Kotegawa’s side and huge mistake on the side of the seller (Mizuho Securities), as today similar mistakes are no longer possible.
 

A role model beyond trading

However, Takashi Kotegawa is also a role model outside the trading platform. Although he has managed to earn a sum of money during his career that would probably send most of us into retirement, he has remained very modest. He keeps himself out of the spotlight and gives virtually no interviews. That's one of the reasons why we don't know much about him and there are only a few pictures available on the internet. He doesn't flaunt his wealth, he reportedly doesn't buy any expensive cars or watches. The only major investment in his own wealth for him was a new apartment (it seems his bedroom was already too small). Kotegawa is thus a clear example of a trader who is into intraday trading for the love of trading and not primarily for the money, which he takes as a measure of success. It should be noted that, given the current market developments, he has probably managed to multiply his wealth further.

Glossary

Bar chart
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A graphical representation of the price of an instrument. Usually shows the opening, closing, high and low price within a specific time period.
Bearish / Bear market
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It is a designation for a falling market.
How do I open a demo trading account?
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You may find the demo account registration form on our website HERE
 
A demo account is created immediately after completing the form and all credentials are sent to your registered email address. You can set up the account type, leverage, currency, trading platform, and initial deposit while filling out the form. You can change all these settings later on by sending us an email request to support@purple-trading.com.
 
Or, if you already have a live account you can create a demo account in your PurpleZone. Log into your PurpleZone, click on the “FX and Crypto Demo” tab then click on the “+ create a new account” button. 
 
Day trader
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It is the trader who uses intraday trading as a trading strategy.
Day trading
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It is a strategy where a trader enters a trade on one day and exits the trade on the same day.
Heikin ashi chart
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A form of price display in a chart. Prices that follow one another are smoothed by averages, so it smooths out irrelevant changes in the trend.
Line chart
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A line or line chart is a simple form of graphical representation of price movement. It connects the price of an instrument for different time periods.
Long
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A long position (long speculation) is a trade that a trader enters when he expects the market to rise. Thus, the trader will buy the asset in question (BUY). The position will appreciate in value when the price of the instrument rises.
Pullback
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Pullback is a term for a temporary price movement that makes a certain backward movement within a trend, so that the price returns or at least approaches some previous level before heading back in the direction of the original trend. A pullback is also sometimes referred to as a return to a broken support which, once broken, has become a resistance.
Short
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Short speculation is a trade where the trader anticipates a market decline. So the trader will sell the asset (SELL).