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 Deep Tide TechFlow)
1. Introduction and mindset
The 'trench trading' strategy is a quick decision-making investment approach accompanied by high risks and high returns. In this model, you need to face 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 within just a few hours.
Key mindset shift
Accepting volatility: You are trading not stable large assets, so profits or losses can fluctuate dramatically overnight.
Stay rational: Maintain calm judgment even amid the frenzy of Meme coins.
Seize the next opportunity: Missed a big market trend? Don’t worry, the market often provides new opportunities in a short time.
2. Understanding market cap psychology
In a highly volatile market, 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 aligns with your narrative (such as Meme, AI, or Elon tweets), this is the stage with the highest potential returns, but also the highest risk.
50k: Psychological threshold
When a Meme coin's market cap exceeds 50k, it usually triggers more attention on social media (such as 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 hold on or even add to your position.
200k+: Overheated zone
When a token's market cap exceeds 200k, if there is a lack of clear project narrative or developer transparency, it may mean you are paying a premium. Entering at this stage is only recommended if there are strong catalysts or sustained high trading volume.
3. Meme factors
When trading Meme coins, a token's explosion may depend merely on humor, community enthusiasm, or a viral tweet.
Code example: For example, a Meme coin named 'Girlfriend = Money Drainer' may surge overnight due to its humorous and relatable theme, triggering a strong resonance within the community.
Community dynamics: Pay attention to trending topics on Twitter (now X) or Telegram. If a Meme begins to gain popularity, this seemingly 'absurd' concept could turn into a real profit opportunity.
4. Narrative and trends
Narratives are the core driving force behind trading volume.
When the market believes in a trend or story, investors often flock to it.
Common Meme narratives
Developer background: If the developer has a successful project history, this is usually a positive signal.
News-driven: For example, a new partnership announcement, especially when it becomes a hot topic on Twitter.
Elon Musk's tweets: If Elon tweets about a 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 publication time. If it's old news being rehashed, be wary of the risk of buying at a high.
5. Considerations for AI
AI is one of the core driving forces behind the current market craze, but not all projects claiming to be 'AI' are trustworthy. Here are some considerations:
Assessing 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 generally indicates that the project has more practical value. ai16z is short for the well-known venture capital Andreessen Horowitz, and its GitHub's open-source resources are often seen as industry benchmarks.
Beware of 'AI girl' token scams: Some so-called 'AI girl' tokens may just be projects packaged as chatbots without real technical support. Such projects often experience rapid price surges followed by significant sell-offs, and investors should be particularly cautious.
Strategy advice: For entirely 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 without sufficient reasons supporting its subsequent growth.
6. Trading volume dynamics
Trading volume is a core indicator of fast-paced trading. When trading volume surges, prices may rise rapidly but can also fall quickly.
High trading volume means opportunity
If a project's narrative is credible and trading volume significantly increases (such as large buy orders flooding in), you can consider adding to your position.
Observe the order book
Large buy walls usually represent strong market interest, while large sell walls may suppress prices.
Whale effect
If well-known large holders or popular on-chain wallets start buying, they may attract followers, further boosting market sentiment.
7. Strategy and risk management
7.1 Entry and exit plans
This is a PVP market, trading is like a game. When you buy, someone may 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
When reaching significant profit stages (e.g., 2x or 5x), promptly recover your initial investment or realize partial profits to reduce risk.
3. Look for confirmation signals
Closely monitor how the chart performs near key price levels that the market is focused on (e.g., 50k, 100k, 1M, etc.) to determine if there are signals for further increases.
7.2 Stop-loss strategies
Due to high market volatility, traditional stop-loss methods may be ineffective. To reduce loss risk, consider setting psychological stop-loss points (based on your risk tolerance) or placing limit orders below key support levels.
7.3 When to hold long-term
If you are confident in a project's prospects or narrative (such as strong technical capabilities or support from well-known figures), you can choose to hold on when prices experience significant pullbacks. However, use this strategy cautiously to avoid significant losses due to a decline in market enthusiasm.
8. Consistency and adaptability
Stay updated on market dynamics: Utilize tools (like DEX filters), join Telegram groups, or follow Twitter hot topics to capture new project releases in a timely manner.
Adapt to market rhythm: When many new projects emerge and market sentiment is active, you can increase trading frequency; in calmer market times, focus more on filtering quality opportunities.
Balance win rate and returns: Even if the win rate of trades is only 40–65%, as long as you can quickly stop losses and let profitable trades continue to grow, there is still a chance for considerable overall returns.
9. Example charts and visual aids
Here are some simulated price trend patterns of micro-cap tokens, helping you intuitively understand typical market behavior.
Chart 1: The 'Lifecycle' of Meme Coins
Early stage (0–15k): Lack of liquidity, with both risks and rewards present.
Mid stage (50k–100k): Starting to gain attention in Crypto Twitter community, investors gradually cashing in on initial profits.
Late stage (100k–1M+): If there is speculation or major influencers (like Elon Musk's tweets), prices may soar rapidly.
Price peaks: As profit-taking accelerates, prices may drop quickly.
Chart 2: Dynamics of trading volume surge
Hot news releases (like news or tweets): Market trading volume surges rapidly due to news stimuli.
Price surge: As trading volume increases, prices rise in sync.
Profit-taking phase: In this phase, large holders or early buyers begin to sell their assets. Although trading volume remains high, it gradually shifts to a seller-dominated market, leading to increased price volatility.
Cooling period: If the market lacks new news or hot speculation, trading volume will gradually decrease, and market heat will decline accordingly.
Conclusion
'Trench strategy' can be built through strong risk management, in-depth research, and strict discipline.
Look for new projects and uncover early opportunities (market cap 7-15k): Focus on their potential and growth space when getting involved in the project's early stages.
Verify project information: Confirm if the project is genuinely AI-related, if there is a real development team supporting it, and whether it is truly associated with well-known figures like Elon Musk.
Pay attention to trading volume and market sentiment: Closely monitor changes in trading volume, observe if large funds (whales) are involved, and keep an eye on the market's positive feedback and heat.
Formulate a clear trading strategy: Plan exit points, staggered profit-taking points, and psychological 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 crucial.
Continuous learning and tracking: Keep clicking, refreshing, and analyzing data to maintain a keen observation of the market to stay ahead.
It is important to note that trading in these small-cap areas carries extremely high risks. Always manage your position size rationally and do not act impulsively out of fear of missing out. This market sees new million-dollar surge projects every day, so there is no need to rush.
May good fortune be with you in 2025 (and beyond)!
Seize the opportunity, but respond strategically and calmly; you have every chance to succeed in these highly volatile 'trench markets.'
Good luck!