What are the specific operations of his core trading strategy, the "Mean Reversion Trading Method based on Deviation Rate"? How does he define "excessive" deviation?

Okay, no problem. Let's talk plainly about the core strategy of the Japanese stock god BNF (Takashi Kotegawa). Many people think his method is mysterious, but the core logic is actually crystal clear once you pierce that veil.

Revealing BNF's Core Strategy: The Deviation Rate Counter-Trend Method (Plain English Version)

Imagine a rubber band. If you pull it down hard and let go when it's stretched too far, doesn't it "swoosh" back? BNF's method is precisely about finding those "overstretched rubber bands" (stocks) temporarily pulled too far by market sentiment (panic or greed), then jumping in at the instant they're about to bounce back to profit from a short rebound.

This is the essence of "counter-trend": Be fearful when others are greedy and greedy when others are fearful.

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How is it Specifically Operated?

This method can be broken down into four steps. Let's look at them step by step:

1. Find a "Baseline" - The Moving Average (MA)

   • First, you need a reference point to judge if the current price is "expensive" or "cheap." BNF frequently uses the 25-day moving average.
   • Think of this line as the "average cost price" of everyone who bought this stock over the past 25 days. If the stock price is above it, most recent buyers are profitable; if below, most are losing money.

2. Calculate the "Deviation Distance" - Bias Ratio

   • Just knowing if the price is above or below the MA isn't enough; the key is "how far" it is. This distance is the "Bias Ratio."
   • The calculation is simple: (Current Price - 25-day MA Price) / 25-day MA Price * 100%
   • The resulting percentage is the Bias Ratio. If it's -20%, it means the current price is 20% below the average cost price of the past 25 days, indicating severe short-term selling pressure.

3. "Counter-Trend" Strike - Buying at Points of Extreme Sentiment

   • Buy Timing: When a stock crashes steeply due to specific reasons (usually panic, not fundamental problems like the company going bankrupt), causing its negative bias ratio to become very large (e.g., -20% or worse), BNF considers this "rubber band" stretched too far; the market panic has gone "overboard." That's when he buys in.
   • He's not betting on the company's bright future; he's betting on "what goes down must come back up" – expecting a short-term, irrational drop to soon be met with a technical rebound.

4. Quick Exit - Profit from the Rebound and Leave

   • The essence of this strategy is "get in and out fast." He's not looking for long-term holding.
   • Once the price rebounds as expected, and the Bias Ratio improves from -20% to, say, -10% or even -5%, bringing the price closer to the "baseline" 25-day MA, he sells to cash in his profit.
   • He profits purely from the segment where the rubber band snaps back from its most stretched point to near its original state. What happens to the stock afterward – whether it keeps rising or falls – doesn't concern him. He moves on to find the next "overstretched rubber band."

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The Key Question: How Big a Drop Counts as "Overly" Deviated?

This is the most crucial and nuanced part of the entire strategy. BNF doesn't have a rigid "-20% = automatic buy" rule. His threshold for "overboard" is dynamic, primarily based on these factors:

1. Looking at the Stock's "Personality"

   • Stocks have different temperaments, like people. Tech stocks or small caps are often naturally more volatile; a 10% drop might be routine, so a -30% might constitute "overboard" for them.
   • Large blue-chip stocks or bank stocks, on the other hand, are usually as stable as a rock, where even a 1% daily move is a big deal. If one suddenly drops 8%, its -8% could be an "epic" over-deviation.
   • Therefore, BNF refers to the historical maximum/minimum bias rates for that particular stock to establish a baseline.

2. Reading the Market's "Mood"

   • Is it a bull market or a bear market? In a confident bull market, a stock crashing for no apparent reason often presents a prime counter-trend opportunity, as buyers will likely step in quickly. But in a bear market where everyone is fearful, a drop could just be the start of a bigger waterfall; trying to "buy the dip" often means catching a falling knife.
   • Is the entire sector/market falling, or just this one stock? If the whole industry is down, it suggests systemic risk, warranting caution. If it's dropping alone due to non-fatal bad news while the broader market is stable, the probability of a rebound is much higher.

3. Examining the "Cause" of the Drop

   • This is paramount! BNF absolutely does not "buy any dip." He quickly assesses the reason.
   • Consider Buying: Crashes resulting from being unfairly punished amid market panic, due to an analyst downgrade, because of slightly missing quarterly earnings expectations... these are "sentiment-driven" or "non-fatal" drops.
   • Absolutely Avoid: Drops caused by accounting fraud, the CEO being arrested, a fatal flaw in a core product... anything that could potentially lead to the company delisting. This is "value destruction." No matter how cheap it seems, it's not a bargain; it's catching a falling knife.

To summarize:

BNF's definition of "overboard" deviation is a comprehensive assessment combining the stock's historical volatility, the current market environment, and the fundamental cause of the drop. He mentally maps a dynamic "normal volatility range" for each stock he watches. A price dives far below the bottom of this range due to irrational factors? That triggers his trading signal.

While this method sounds simple in principle, it demands exceptional psychological fortitude, strict discipline, and acute sensitivity to market sentiment. The biggest risk for ordinary people trying to replicate it is mistaking "bargain hunting" for "catching a falling knife," making risk management absolutely critical.