'Trench trading' strategies are a way to make quick decisions, accompanied by high risks and high rewards.
Author: arndxt
Compiled by: Deep Tide TechFlow
Here is a detailed guide based on my personal practical experience, providing you with a clear and actionable framework.
It aims to help you better navigate the complexities of high trading volume markets.
By summarizing the lessons learned from 'trench trading,' this blueprint will guide you on how to trade memes, seize AI-driven trends, and stand out in high-risk, high-reward opportunities.
(Deep Tide Note: 'Trench trading' originates from 'trench tactics,' where soldiers dig trenches to protect themselves while looking for breakthrough opportunities under extreme pressure and danger. 'Trench trading' describes how investors need to be well-prepared like soldiers in highly volatile and competitive market environments, including research, strategy, and discipline, to cope with opportunities and risks that may arise at any moment.)
(Original English table from @arndxt_xo, compiled by Deep Tide TechFlow)
1. Introduction and Mindset
'Trench trading' strategies are a way to make quick decisions, accompanied by high risks and high rewards. In this mode, 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 shifts
Accept volatility: You are not trading stable large assets, so profits or losses can fluctuate dramatically overnight.
Stay rational: Even amid the frenzy of meme coins, maintain calm judgment.
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 a highly volatile market, the most important thing is to know when to decisively buy and when to cautiously wait.
7–15k: Initial Stage
This is an entry point for extremely low market caps. 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 market cap of meme coins breaks 50k, it typically 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 may choose to continue holding or even increase your position.
200k+: Overheated Zone
When the 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. 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, the token's explosion may simply rely on humor, community enthusiasm, or a viral tweet.
Codename Example: For instance, a meme coin named 'Girlfriend = Money Drainer' may surge overnight due to its humorous and relatable theme, resonating strongly with 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 may become a real profit opportunity.
4. Narrative and Trends
Narratives are the core driving force behind trading volume.
When the market believes in a certain trend or narrative, investors often flock in.
Common Meme Narratives
Developer Background: If the developer has a track record of successful projects, it is usually a positive sign.
News-driven: For instance, a new partnership announcement, 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 surge in 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 release time of the news. If old news is being resold, beware of the risks of being caught at high positions.
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 to keep in mind:
Assess project value through ai16z GitHub open-source code: If a project references 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 the abbreviation for the well-known venture capital firm Andreessen Horowitz, whose GitHub open-source resources are often seen as industry benchmarks.
Beware of the 'AI Girl' token scam: Some so-called 'AI Girl' tokens may simply be projects masquerading as chatbots, lacking real technical support. These projects typically experience rapid price surges followed by significant sell-offs, and investors should exercise extra caution.
Strategy suggestion: 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 higher prices unless there is sufficient reason to support further growth.
6. Dynamics of Trading Volume
Trading volume is the core indicator of fast-paced trading. When trading volume surges, prices may rise quickly but can also fall just as fast.
High trading volume means opportunity
If the project narrative is credible and trading volume increases significantly (such as large buy orders flooding in), it may be appropriate to increase your position.
Observe the Order Book
Large buy walls usually represent strong market interest, while large sell walls may suppress prices.
Whale Effect
If known large holders or popular on-chain wallets start buying in, it may attract followers, further boosting market sentiment.
7. Strategies and Risk Management
7.1 Entry and Exit Plans
This is a PVP market, where trading is like a game of strategy. When you buy, someone else 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
At important profit-taking stages (such as 2x or 5x), promptly recover your initial investment or realize partial profits to reduce risk.
3. Finding Confirmation Signals
Carefully observe the performance of charts around key price points (such as 50k, 100k, 1M, etc.) to determine if there are signals for further upward movement.
7.2 Stop-Loss Strategy
Due to the high volatility of the market, traditional stop-loss methods may be difficult to implement. To reduce the risk of losses, consider setting psychological stop-loss points (loss ranges set according to your risk tolerance) or placing limit orders below key support levels.
7.3 When to Hold Long-term
If you are confident in the prospects or narrative of a project (such as strong technical prowess or backing from well-known figures), you can choose to continue holding when prices experience a significant pullback. However, use this strategy cautiously to avoid major losses due to fading market enthusiasm.
8. Consistency and Adaptability
Stay updated with market dynamics: 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 rhythms: When a large number of new projects emerge and the market atmosphere is active, consider increasing trading frequency; conversely, when the market is calmer, focus more on screening quality opportunities.
Balance win rate and returns: Even if the win rate of trades is only 40–65%, as long as you can cut losses quickly and let profitable positions continue to grow, there are still opportunities to achieve substantial overall returns.
9. Example Charts and Visual Aids
Here are some simulated price trend patterns of micro-cap tokens to help you visualize typical market behavior.
Chart 1: The 'Lifecycle' of Meme Coins
Early Stage (0–15k): Low liquidity, with risks and rewards coexisting.
Mid Stage (50k–100k): Begins to gain attention in the Crypto Twitter community, with investors gradually realizing initial profits.
Late Stage (100k–1M+): If speculation or major influencers (like Elon Musk's tweets) occur, prices can skyrocket quickly.
Price Peaks: As profit-taking accelerates, prices may drop quickly.
Chart 2: The Dynamics of Trading Volume Surge
Hot news release (such as news or tweets): Stimulated by news, market trading volume surges rapidly.
Price surge: As trading volume increases, prices rise in tandem.
Profit-taking phase: At this stage, large holders or early buyers begin to sell their assets. Although 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 hot speculation, trading volume will gradually decrease, and market enthusiasm will decline accordingly.
Conclusion
'Trench strategies' 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 entering at the project's early stage.
Verify project information: Confirm whether the project is genuinely AI-related, whether 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 whether large capital (whales) are entering, and keep an eye on positive feedback and heat in the market.
Establish 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 micro-cap meme space, new opportunities arise every hour, making it especially important to maintain stability and patience.
Continuous learning and tracking: Keep clicking, refreshing, and analyzing data to maintain sharp observation of the market so you can always stay ahead.
It should be noted that trading in these small-cap areas carries extremely high risk. Always manage your position size wisely and do not act rashly for fear of missing out. New million-dollar surge projects emerge in this market every day, so there is no need to rush.
May 2025 (and beyond) bring you good luck!
Seize opportunities, but approach with a strategic and calm mindset; you have every chance of succeeding in these highly volatile 'trench markets.'
Good luck!