The "trench trading" strategy is an investment style that requires quick decision-making and is accompanied by high risks and high returns.
Author:arndxt
Compiled by: TechFlow
The following is a detailed guide based on my personal practical experience, providing you with a clear and actionable framework.
It is designed to help you better navigate the complexities of high-volume markets.
By summarizing lessons learned from “trading in the trenches,” this blueprint will show you how to trade memes, seize AI-driven trends, and excel in high-risk, high-reward opportunities.
(Note from Shenchao: Trench trading comes from trench tactics, which refers to the practice of soldiers digging trenches to protect themselves during wars while looking for breakthrough opportunities under extreme pressure and danger. Trench trading is used here to describe the need for investors to be fully prepared like soldiers in certain highly volatile and competitive market environments, including research, strategy, and discipline, to deal with opportunities and risks that may arise at any time.)
(Original English table from @arndxt_xo, compiled by Shenchao TechFlow)
1. Introduction and Mindset
"Trench Trading" strategy is a fast decision-making investment method accompanied by high risks and high returns. In this model, you need to deal with micro-cap tokens, meme narratives, AI-related topics, and breaking news. These factors can push a token's market cap from 15k to 10 million or even higher in just a few hours.
Key Mindset Shift
Accept Volatility: You are not trading stable large assets, so profits or losses can fluctuate dramatically overnight.
Stay Rational: Keep a calm judgment even in the frenzy of meme coins.
Seize the Next Opportunity: Missed a big market move? Don't worry, the market often provides new opportunities in a short time.
2. Understanding Market Cap Psychology
In high-volatility markets, the most important thing is to know when to decisively buy and when to cautiously observe.
7–15k: Initial Stage
This is a very low market cap entry point. If you find a new project that fits your narrative (like meme, AI, or Elon tweets), this is the stage with the highest potential returns but also the highest risks.
50k: Psychological Threshold
When the meme coin market cap exceeds 50k, it usually attracts more attention on social media (like Crypto Twitter and Telegram). Many early investors may take partial profits at this stage. If you have confidence in the project's narrative or development team, you can choose to continue holding or even increase your position.
200k+: Overheated Zone
When the token market cap exceeds 200k, a lack of clear project narrative or developer transparency may indicate that you are paying a premium. It is only advisable to enter at this stage if there are strong catalysts or sustained high trading volume.
3. Meme Factors
When trading meme coins, a token's explosion may simply rely on humor, community enthusiasm, or a viral tweet.
Code Example: For example, a meme coin called 'Girlfriend = Money Drainer' may skyrocket overnight due to its humorous and relatable theme, triggering a strong resonance in the community.
Community Dynamics: Pay attention to trending topics on Twitter (now X) or Telegram. If a meme starts to gain popularity, this seemingly "nonsensical" concept could become a real profit opportunity.
4. Narrative and Trends
Narrative is the core driving force behind trading volume.
When the market believes in a trend or story, investors often flock in.
Common Meme Narratives
Developer Background: If the developer has a track record of successful projects, this is usually a positive signal.
News Driven: For example, an announcement of a new partnership, especially when it becomes a hot topic on Twitter.
Elon Musk's Tweets: If Elon tweets about a certain meme or AI concept, it usually triggers a large trading volume, such as $KEKIUS or $PNUT.
Mascot Effect: New dog breeds or random cartoon characters can become market hotspots.
Before participating, be sure to verify the news release time. If old news is being repeatedly hyped, be cautious of the risk of entering at a high point.
5. Considerations for AI
AI is one of the core driving forces of the current market trend, but not all projects claiming to be 'AI' are trustworthy. Here are some points to note:
Evaluate Project Value through ai16z GitHub Open Source Code: If a project cites legitimate open source code or repositories (e.g., resources from well-known tech companies or top AI labs), it usually indicates that the project has more practical value. ai16z is short for the renowned venture capital firm Andreessen Horowitz, whose GitHub open source resources are often seen as industry benchmarks.
Beware of 'AI Girl' token scams: Some so-called 'AI Girl' tokens may simply be projects packaged as chatbots, lacking real technical support. Such projects often experience rapid price increases followed by significant sell-offs, and investors should be particularly cautious.
Strategy Advice: For brand new projects, if the developer has a good track record, consider entering early (market cap 10–15k). However, if the market cap exceeds 200k, do not blindly chase after it unless there are strong reasons to support its continued growth.
6. Trading Volume Dynamics
Trading volume is a core indicator for fast-paced trading. When trading volume surges, prices may rise quickly but can also fall rapidly.
High Volume Means Opportunity
If the project narrative is credible and trading volume significantly increases (like large buy orders pouring in), it may be appropriate to increase your position.
Observe the Order Book
Large buy walls typically indicate strong market interest, while large sell walls may suppress prices.
Whale Effect
If well-known large holders or popular on-chain wallets start buying in, it can attract followers, further boosting market sentiment.
7. Strategy and Risk Management
7.1 Entry and Exit Plans
This is a PVP market, and trading is like a game. When you buy, someone else might be selling.
1. Set Goals
Set a rough exit market cap target, such as achieving 2x, 3x, or even higher returns.
2. Staged Profit Taking
At important profit stages (like 2x or 5x), promptly recoup your initial investment or realize partial profits to reduce risk.
3. Finding Confirmation Signals
Closely observe the performance of charts near key price points of market attention (such as 50k, 100k, 1M, etc.) to determine if there are further signals for a rise.
7.2 Stop-Loss Strategy
Due to high market volatility, traditional stop-loss methods may be difficult to implement effectively. To reduce loss risk, consider setting a psychological stop-loss point (a loss range based on your risk tolerance) or placing limit orders below key support levels.
7.3 When to Hold Long Term
If you have confidence in a project's prospects or narrative (such as strong technological strength or support from well-known figures), you can choose to continue holding when prices experience significant pullbacks. However, this strategy should be used cautiously to avoid significant losses due to fading market enthusiasm.
8. Consistency and Adaptability
Stay Updated with Market Trends: Use tools (like DEX filters), join Telegram groups, or follow Twitter hotspots to capture new project release information in a timely manner.
Adapt to Market Rhythm: When a large number of new projects emerge and market atmosphere is active, you can increase trading frequency; whereas in quieter market conditions, focus more on filtering quality opportunities.
Balance Win Rate and Profit: Even if the win rate of trades is only 40–65%, as long as you can quickly cut losses and let profitable trades continue to grow, there is still a chance for substantial overall returns.
9. Example Charts and Visual Aids
Here are some simulated price trend patterns of micro-cap tokens to help you understand typical market behavior more intuitively.
Chart 1: The 'Lifecycle' of Meme Coins
Early Stage (0–15k): Lack of liquidity, with both risks and rewards.
Mid Stage (50k–100k): Begins to gain attention in Crypto Twitter, and investors gradually realize initial profits.
Late Stage (100k–1M+): If speculation or major influencers' tweets (like Elon Musk's) occur, prices may soar rapidly.
Price Peaks: As profit-taking accelerates, prices may fall rapidly.
Chart 2: Dynamics of Volume Surge
Hot news releases (like news or tweets): Market trading volume rapidly surges in response to news stimuli.
Price Surge: As trading volume increases, prices rise in tandem.
Profit-Taking Stage: At this stage, large holders or early buyers begin to sell their assets; while trading volume remains high, it gradually shifts to a seller-dominated market, and price fluctuations may intensify.
Cooling Period: If the market lacks new news or hype, trading volume will gradually decrease, and market enthusiasm will decline accordingly.
Conclusion
"Trench Strategy" can be built through strong risk management, in-depth research, and strict discipline.
Look for New Projects and Explore Early Opportunities (Market Cap 7-15k): When entering at the initial stage of a project, focus on its potential and growth space.
Verify Project Information: Confirm whether the project is genuinely related to artificial intelligence, whether it has a real development team supporting it, and whether it is truly associated with well-known figures like Elon Musk.
Monitor Trading Volume and Market Sentiment: Closely monitor changes in trading volume, observe whether large funds (whales) are entering, and pay attention to positive feedback and enthusiasm in the market.
Establish a Clear Trading Strategy: Plan your exit points, staggered profit-taking points, and mental stop-loss lines in advance to cope with market fluctuations.
Stick to the Plan: In the meme micro-cap space, new opportunities emerge every hour, so maintaining stability and patience is particularly important.
Continuous Learning and Tracking: Keep clicking, refreshing, and analyzing data to maintain sharp observation of the market, so you can always stay ahead.
It is important to note that trading in these low market cap areas is highly risky. Always manage your position wisely and do not act rashly out of fear of missing an opportunity. New million-dollar surge projects emerge daily in this market, so there is no need to rush.
May 2025 (and beyond) bring you good luck!
Seize the opportunity, but respond with a strategic and calm mindset; you have every chance to succeed in these highly volatile 'trench markets'.
Good luck!