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   Preface

In this bull market, meme coins still have the lion’s share of attention as average investors cling to them, believing they are their only chance to succeed this cycle.
Even while the possible rewards are enormous, there is a commensurate level of risk involved.

This article aims to assist you in developing trading rules and profit-taking methods so that you can increase the likelihood that your efforts will yield profits rather than completely roundtripping all of your paper gains in the hopes of achieving the next 100x.

Reasons Memecoins Are So Popular

Memes are as authentic and straightforward as crypto gets. Traditionally, memes have been linked with retail traders, but this cycle hasn’t seen a full retail comeback. Despite this, memes have captured more attention than ever during the early stages of this cycle.

At present, the market is dominated by seasoned crypto traders, many of whom are in their second or subsequent cycle. The current market participants are likely to be:

• Focused on maximizing their profits.
• Aware that over 90% of ‘fundamental’ projects are essentially memes, lacking in real value and destined to eventually fail.

We’ve seen numerous examples illustrating:

• The remarkable wealth-building potential of memes.
• The downfall of multi-billion-dollar, VC-backed ‘fundamental’ projects that suffer slow declines due to long unlock periods.

Given these points, it’s understandable why many are gravitating towards memes. They have proven to be powerful wealth generators without the pretense of ‘innovative tech.’

The previous performance of $PEPE and $WIF, recovering strongly after pullbacks last May, underscores the changing perception of memes this cycle. Unlike in the past, when meme strength signaled market tops and peak trader confidence, today’s memes are demonstrating resilience after market-wide pullbacks and periods of low confidence.

Large-cap memes like $PEPE and $WIF have almost become refuges for users in times of uncertainty. The meme super cycle is clearly underway.

Risk Management: Position Sizing Relative to Portfolio

Let’s divide it into four categories:

• 4 figures (1k to 9k)
• 5 figures (10k to 100k)
• 6 figures (100k to 900k)
• 7 figures (1m to 9m)

Playing with a Low 4-Figure Portfolio

The million-dollar question: “I have low capital; how do I succeed with shitcoins/memecoins?”

The honest answer is that the chances are incredibly slim, especially for newcomers. However, here are some guidelines to improve your odds:

1. Invest with Conviction: Allocate a significant portion of your portfolio to investments with strong conviction and sound reasoning.
2. Quick Exits: Aim for a 2-4x return and exit quickly. Avoid holding too long when most of your portfolio is in one play.
3. Selective Investments: Focus on reasoning and rationality rather than charts and candles. Allocate 20-25% into a play, risking enough to potentially move out of this phase.
4. Bull Market Opportunities: In a strong bull market with high risk appetite, narratives can provide momentum for winning plays.

Step 1: Accept the Reality

Understand that you won’t make it overnight with a small amount like $100. Never rely solely on crypto to cover living expenses. Think of crypto as a secret project, a skill you’re mastering behind the scenes.

Step 2: Master a Specific Niche

With low capital, focus on improving your trading skills rather than making money. Save up capital until you’re skilled at spotting opportunities. Choose a niche (swing trades, low caps, mid caps, high caps) and dive deep. Practice with paper trading, and build your capital through side hustles in Web3, such as web development, moderation, or graphic design.

Step 3: Start Trading with Saved Capital

Once confident in your trading skills and with some capital saved, begin investing slowly. On Ethereum, one ETH can be enough if you’re good at spotting plays. Be picky with trades, strict with taking profits, and cut losses quickly.

Step 4: Make Long-Term Investments

With a solid portfolio, invest a substantial chunk into a long-term conviction play. Hold it until your conviction fades. Even a 3-5x return on a significant part of your portfolio can be highly rewarding. While gambling small amounts on high-risk plays can yield big returns, the goal is to follow rational guidelines.

Low 5-Figure Portfolio

If you have low five figures, stick to the same strategy as with a low 4-figure portfolio, but reduce your positioning to 10-15% per play. Remain extremely selective. With this capital, you can trade charts comfortably, buying at support levels and selling at resistance on main runners. As you approach high five figures, focus more on trading charts and follow the volume closely.

Low 6-Figure Portfolio

Maintaining and growing a six-figure portfolio is challenging. Your goal here is to preserve gains and deploy capital in worthy opportunities. The journey to seven figures will be slow, requiring commitment to a long process. Invest a good amount in new main runners if you get in early. Compare the number of holders/market cap to recent high performers and check if the majority on Twitter have picked it up yet.

Risk Management: How to Manage Risk on Your Trades

1. Set Invalidations for Every Play:
   • Identify and mark major levels of support on the chart. If the price hits these levels, cut your losses and move on.
   • Avoid holding assets to zero. If a trade isn’t going your way, exit promptly.
   • Invalidations can occur due to various factors such as slowing volume, losing major supports on charts, or legitimate FUD.
2. Pre-Plan Your Exits:
   • Before entering a trade, determine in advance where you will exit if the trade doesn’t go as planned.
   • Depending on your goals and risk tolerance, consider using stop-losses for older coins. For new and volatile runners, you might adopt a “10x or bust” approach.
3. Monitor Hype and Sentiment:
   • For memecoins, keep an eye on Telegram and Twitter for hype and sentiment.
   • Assess general market sentiment, especially focusing on main runners and their derivatives. If a main runner dips, associated coins will likely dip harder.
4. Evaluate Utility Coins:
   • For utility coins, monitor the development team’s activity, ensuring they consistently roll out updates.
   • Look for upcoming catalysts that may not be priced in by the market yet.

Examples of Poor Risk Management:

• Holding assets without taking profits, leading to round-tripping massive paper gains back to losses. \
  A few examples:

• Round tripped $4M worth https://x.com/Six9euf/status/1814435148433076707

• Whales selling $8M worth of $JUP for $BODEN at the top, losing 98% turned his $8M into $85k. https://x.com/clippedtoby/status/1815090179666788481

• Zooming out will give you some perspective. https://x.com/basedkarbon/status/1814407535417610689

• Turning $9 into $40,000 back down to ~$1600 https://x.com/kkashi_yt/status/1815664795460517951

• Elon Musk temporarily changed his Twitter PFP to have laser eyes. While this was a strong catalyst, when he changed his PFP again, the price dumped aggressively. Things can change very quickly, and often you won’t be around at the perfect time to hedge if you haven’t taken some profits already.
  https://x.com/kkashi_yt/status/1815757151262196149

Mental Frames and Questions to Ask Yourself

1. Reduce Risk During Price Spikes:
   • Take profits during significant price swings to lower overall risk.
   • Ask yourself if those talking about the coin are known for pumping and dumping.
2. Understand the Pump:
   • Identify why the coin is pumping. Is it driven purely by speculation or linked to successful developers from previous projects?
   • Recognize that the top is often marked by widespread hype from influencers or major events like a Binance listing.
   • If you feel euphoric and start taking screenshots, it’s likely time to sell.
3. Incremental Profit-Taking:
   • Regularly taking profits is key. It’s about what you keep, not just your paper gains.
   • Example strategy: Sell 25% at a 3-4x gain to cover initial costs, and then sell another 25% every 2-3x gain.
   • Keep a “moonbag” of 10-20% to stay invested and avoid seller’s remorse.
     • Helpful Principles
4. Learn from Your Mistakes:
   • Firsthand experience is the best teacher in trading. Lessons from losses are invaluable.
   • Until you make a mistake, advice on taking profits or checking contract addresses may not fully resonate.
   • The pain of a mistake serves as a powerful future reminder.
5. Value in Simplicity:
   • Simplicity is often overlooked because it doesn’t seem sophisticated.
   • Watch the biggest movers during market bounces to see where the most attention is.
   • Example: DCA into top performers like $MOG during June and July 2024 showed consistent outperformance.
   • Identify which holdings consistently underperform during market bounces to adjust your focus.
6. Avoid Overtrading:
   • Overtrading can slowly drain your portfolio. Constantly swapping positions can reduce mental clarity.
   • Stay disciplined: do your research, build conviction, choose positions, and stick with them.
     1. Learn to Love Selling:
   • Selling is psychologically harder than buying due to the fear of missing out on massive gains.
   • Consistently taking profits is generally more rewarding than holding out for improbable returns.
   • Each day you hold a position, you’re effectively choosing it over other potential opportunities.
7. Consistent Gains Over Big Wins:
   • Aim for multiple 3-5x gains rather than hoping for a 100x return.
   • Scenario #1: Holding out for a 10-100x gain often results in missing smaller, more consistent profits.
   • Scenario #2: Consistent 3-5x returns can compound significantly over time.
8. Avoid Re-entering Winning Trades:
   • After a 2-4x gain, close the trade and wait for a dip before considering re-entry.
   • Post-win euphoria can lead to overconfidence and positive bias, increasing the risk of losses.
   • Removing a play from your watchlist after closing can help avoid emotional re-entry.
9. Trust Your Emotions with Caution:
   • In crypto, the right decision often feels wrong. Selling during a hype phase or buying during a pullback can be counterintuitive but profitable.
   • Recognize that emotions like euphoria and fear can mislead you, and make decisions based on rational analysis.

Disclaimer：

1. This article is reprinted from [Insightful]. All copyrights belong to the original author [Insightful]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.