Preface
My output in Web3 has always been mainly doing investment research and writing long research articles. Before October this year, although I also made money on some memes, I generally regarded them as hot topics for sector rotation. , and did not systematically study how to play Meme. But on the one hand, I am increasingly aware of Meme’s status as a new attention economy in this cycle. On the other hand, the intention exchange that my project dappOS will launch in the next phase is also related to Meme and transactions.
Therefore, about two months ago, I began to conduct in-depth and systematic research on how to do Meme trading. I just happened to catch up with the bull market of BTC and Meme, and I gained quite a lot. The initial capital of 10 SOL, which I only planned to play for fun, has grown all the way to 1000+ SOL, which is more than 100 times higher. Recently, as the popularity of Meme has subsided, I have compiled my trading experience from the previous period as follows to share with you.
Summary: What kind of money are you making?
There are many ways to make money in the market, but to achieve long-term stable profits, you must understand the logic behind each of your transactions, that is, figure out whose money you are making. If you rush into the car without thinking about this problem clearly, then there is a high probability that you will be the one who loses money in the market.
In fact, different traders have different styles. In summary during this period, I am better at making money with two logics:
New hot sentiment money;
Excellent narrative targets the money that breaks out at the bottom;
Since the underlying logic of the two transactions is different, the target selection, entry timing, and exit timing are all different, which will be shared in detail next. Even for "VC coins" in exchanges, some trading logic is applicable in the current context where currency price increases are based more on sentiment and not fundamentals.
1. Trading logic of hot sentiment
1. How to choose the target?
In a bull market, if a new hot topic and new concept emerges and begins to spread in a split way, the price of the corresponding Meme will form a continuous surge.
Typical characteristics of this stage are: the currency price has skyrocketed, with basically no correction or even if there is a short-term correction, the amplitude does not exceed 30%; Twitter KOL, WeChat/TG groups, and news media begin to publish a large number of articles discussing this hot concept. Mainly call for orders, and as time goes by, some neutral/negative comments will slowly appear. The appearance of these comments is a sign of divisive communication, indicating that these people saw other people calling for orders and discussing, and they were not optimistic about it and did not get on the bus, but they felt that it was a hot topic and needed to be commented on.
There are two ways to seize this opportunity:
Frequently check Twitter and follow the hot topics in GMGN, and have a certain judgment on the intensity of narrative communication. For example, the narratives of $BAN, $RIF, and $LUCE all have different angles and new ideas, while $DOGE, Eagle, etc. are also powerful from a communication perspective;
If you didn’t pay attention to it at the first time, when you see some Twitter KOL posts and some group friends talking, you can also analyze and judge which stage of divisive communication this project is in. If you think this project is in the early stage of divisive communication, it is also a step forward. Timing of the field;
Generally speaking, according to my currency selection preference, the market value of this currency is generally between 5M-50M when I decide to enter the market. For coins below 5M, people who are already on the bus are often calling for orders everywhere. They are very fragile, and there may not necessarily be a strong banker behind them. It is easy to return to zero in a wave; for coins above 50M, the odds are not high enough. Even if you want to enter the market, you must control your position. For popular coins above 50M, I prefer to profit from the shallow bottom burst after its correction.
2. How to enter?
When deciding to buy this kind of target, you need to enter the market as soon as possible. Because you make money from hot emotions, you are betting that this narrative can be divisive and spread, or that you are in the upper reaches of this divisive spread. If you wait for a correction, it is easy to fail to wait until the price reaches your psychological level, and then watch the price rise all the way, and KOLs from all walks of life analyze the stars and sea of this Meme from various angles. When you pat your thighs and regret it, chase the high price and enter the market, and finally get trapped.
However, in actual practice, in order to have a relatively low average cost, if the target is rising rapidly, I will consider buying 40% of the scheduled position, and then buy the remaining amount when there is a correction of about 20-30%. 60% below, if there is no slight correction, the position will not be covered. If the target is currently trading sideways/down, I will fill up all positions at once and will not consider covering positions later.
If the position is relatively large when entering the market, I will learn Sister Hui’s three-wallet method and divide the funds into three new wallets of 20%, 30%, and 50% for buying. This will reduce the risk of being monitored by fixed points to a certain extent, and is convenient. Control the position when leaving the market later.
3. How to exit?
If it goes up: The 15-minute trend line profit-taking method recommended by Brother Dayu @BTCdayu is more effective in practice, because what we make is emotional money. If the 15-minute trend line falls below, it is easy to have a continuous stampede decline. At this time This is the time to take profits in stages. Generally speaking, I will sell 30%-50%-20% when the price falls below the 15-minute trend line after three rises. However, if there is a significant rise and then falls back to the cost line, I will generally consider selling all remaining positions to prevent profits from turning into losses after further corrections;
(Attached: Brother Dayu’s video link explaining the 15-minute trend line profit-taking method)
If it falls directly: If the currency never rises above the cost price after buying it, it means there is something wrong with the logic of the target selection. In this case, I usually consider stopping the loss at around half of the cost price; if the target is indeed a good target, there is room for a second outbreak, and generally speaking, there will be an opportunity to enter the market again at a lower cost.
2. The trading logic of the bottom explosion of excellent narrative
1. How to choose the target?
Even some excellent narratives whose market value exceeded 50M or even 100M in the first wave often experienced a deep correction of about 70-80%, such as $MOODENG, $AI16Z, $BAN, and $LUCE, which later had a stable market value of 100M+. There were moments of deep correction after the first wave of currency outbursts.
On the one hand, this is the natural result of the ebb and flow of emotions (you can look at the K-line trend of $SLERF just after it opened at the beginning of the year. At that time, it was impossible for anyone to be the banker in the early stage of $SLERF. That K-line is the most classic natural K-line of pure retail PVP. ; Therefore, to make money based on this logic, you need to first determine whether the narrative has staying power and whether there is the possibility of a second explosion.
How to judge whether a narrative will explode again is also a matter that requires the accumulation of experience. Because sometimes this is related to the trading logic of the dealer behind it, we can only increase the winning rate as much as possible but cannot achieve 100% victory. Generally speaking, I think narratives with a high probability of a second outbreak will have one or more of the following characteristics:
A community with a strong unique culture that is not limited to the Chinese-speaking community (such as $NEIRO, $ACT, $ELIZA);
The concept itself is related to a certain big event that will definitely happen in the future (such as $BAN, $LUCE);
It has certain technological fundamental attributes, will continue to grow, and will benefit from the explosion of related tracks (such as $GOAL, $RIF);
The following narratives are more likely to appear in a wave:
The concept itself is related to an event that has already happened, and the probability of subsequent events is low (because the thing has already happened, and people's attention will slowly turn to new events);
Celebrities call for orders, such as Musk concept, Trump concept, V God concept, CZ concept (celebrities will continue to post new concepts and their attention will be distracted, and the Meme coins of celebrity concepts are generally generated temporarily + Yezhuang enters, You will see a large number of disks with the same name at the same time. Maybe the dealer will run away and play with new concepts after the first wave);
Non-leading leaders in a similar narrative concept (after a wave of outbreak + correction, funds are more inclined to enter the leading market, rather than long two, three, four, five);
2. How to enter
This kind of target must wait until a deep correction before entering the market. You must believe that a big correction will definitely happen. If there is really no Meme that has a correction of more than 50% and rises from 10M to 1B, then we will not make money. Generally speaking, I am accustomed to looking for opportunities to enter the market after I see the currency's deep correction of at least 70% and the bottom sideways trading for more than 2 days. The entry point is at the middle bottom of the sideways range. For some coins whose correction is not that deep, such as around 50%, if I really want to get on board, I will generally consider taking a 40% position.
Note that since this is a logic of ambush and explosion, the target may still be in the sideways range and suffer slight losses for a considerable period of time (such as 1-2 weeks), which will occupy the liquidity of funds. Therefore, when ambushing, you should also pay attention to position control to avoid the situation where you are ambushing a certain project with a heavy position and you can only cut the flesh to obtain funds after seeing new opportunities.
Let’s also talk about the issue of swing trading. Although I may enter/leave the market multiple times for the same currency, the logic of each entry or exit belongs to one of the two trading logics. Then it became clear what kind of money I was making and how to leave the market. If you just look at the K-line and sell high and buy low, it is easy to sell or be trapped, so I don't recommend it here. I have never seen any master make money in the long term by doing Meme bands.
3. How to exit?
If it rises: Since you are making money from the narrative explosion, the expected odds of this kind of transaction are relatively high, so when you break through the sideways range for the first time and then step back, you usually don't make a profit. After the underlying price has risen by at least 50%, consider using the 15-minute trend line take-profit method to take profits in batches. Since the narrative of the second outbreak is generally relatively strong, it is best to leave a 20% tail position and look forward to big opportunities such as listing on Binance.
If it falls directly: If it does not rise, confirm that it has fallen below the bottom of the sideways range (for example, it has not gone up after a period of time, or it has fallen very quickly and is 20% lower than the previous bottom), and the target on the chain must be determined Stop loss, although in altcoins on large exchanges, dealers often make a false breakout before pulling the market to absorb more chips and make people get off the market, but because the Meme pool on the chain is generally not deep, once a breakout occurs The key support level formed by trading sideways for more than 2 days often results in a continuous stampede-like decline, so do not imagine that this is "the banker is testing the market."
If it is a target on a major exchange such as Binance/OK, due to good liquidity and the tendency of market makers to trade in this way, it is indeed very likely that a "false breakout" will occur, and you can wait and see for a while as appropriate.
Recommended KOLs to follow
There are also many excellent KOLs in the Meme trading field of T9witter. Four of them are the ones I highly recommend everyone to pay attention to. I also learned a lot from them:
Wizard (@0xcryptowizard): $ACT became famous in one battle. He has a deep understanding of Meme trading. His novice tutorials and some comments on benchmarks are very valuable. The Meme tutorial at the top of the wizard is very suitable for newcomers to get started.
Sister Hui (@0xmagnolia): Practical sharing KOL, $MOODENG, $BAN are the battles that made Sister Hui famous. Some contents about how to make a firm offer and how to trade were even compiled into Hui Jing, which is worth learning. The interpretation of different time periods and the interaction in the comment area in $BAN’s review long tweet are also very interesting.
Dayu (@BTCdayu): I am very aware of capturing hot spots. When many new narratives appear or old narratives are about to explode, I can capture them and post them in the group, such as $PNUT, $LUCE, $RIF, etc. There are also many in the group Communicate and share with other experts. Even if you only read public tweets, it is very helpful to understand hot topics and emotions.
Mr. Mai (@Michael_Liu93): Institutional background, his understanding of Meme as the attention economy of the new era is very advanced. If you are a VC, researcher, or have a technical background and still don’t like Meme, I recommend reading some of Mr. Mai’s long tweets. ;Some interpretations from the perspectives of devs and bookmakers are also very helpful.
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