Hello traders,
This post is because of all the DMs I get regarding trading memecoins.
Let us begin with a meme then.
My favorite meme type is the midwit meme. Trading is a game of extremes. Hyper-pareto of sorts. Everyone loves to visualize themselves as the crypto-trader who buys a shitcoin at $0.0000002 and then sells it at $3 and gets their lambo.
Like this individual who bought $460 worth of Vine and is sitting on $7m in profits(probably tanks the coin if they sell due to liquidity).
Or this sensible person who cashed out entirely at $495k profit from an initial investment of $750.
So Algo, you are saying there is a chance!
Well, hold your horses. On the same memecoin, this is what happened with one trader.
They sold the token at a loss and missed out on about $300k in gains.
Back to the title of the post:
In betting, A sharp in sports betting is a professional, highly skilled bettor who consistently wins and influences betting markets. These bettors typically maintain win rates around 55%, with the most successful reaching up to 60% (thank you Perplexity)
A mark is the intended victim or target of a confidence trick or scam, a term dating back to the 1700s when criminals used it to describe someone they planned to swindle. The ideal mark typically has financial resources worth targeting and often displays characteristics such as greed, naivety, or a lack of familiarity with the proposed scheme, while still being intelligent enough to understand the con's basic premise. Con artists carefully select their marks through a process called "putting the mark up," sometimes using a "convincer" - a small initial scam where the mark makes money - to build trust. The confidence trickster, often working with accomplices called shills, creates an elaborate scenario that may involve a "big store" (a fake business setup) to appear legitimate before executing the final phase of the scam, known as "the sting," after which they quickly disappear before the victim realizes they've been conned.
If you are sitting at a table and you don’t know if you are a Mark or a Sharp, you are likely a mark. If you think you are a Sharp, even then in all likelihood you may be a Mark down the road on a bigger table.
Let me explain:
If you are a consistently profitable shitcoin trader, you would feel like you are a Sharp( and you have every right to, Kudos). However, the scalability of the operation is limited by the liquidity of the tokens. And then your greed will take over at some point and you would try your hands at larger memecoins orPerps on bigger tokens with size and leverage.
What happens next is usually the same. See Specimen A below.
“So, Algo are you telling me my dreams of a Lambo/Porsche 911 GT3 RS are just dreams and I should rather just buy the megalotto every week with the hopes of hitting it someday”
Well, don’t put it that way. But in all likelihood, you are better off putting your money to work either on BTC/ETH(WTF??)/SOL or tradfi S&P500/NASDAQ etfs.
“So I cannot become rich beyond my wildest dreams through memecoins?”
There is still a huge amount of edge in crypto and you can milk it until it stops working but treating it like a systematic trader day-job and not as a lotto ticket.
“Okay this is interesting, tell me more”
Okay fine, let me type.
Step 0:
Find your edge.
Rule of thumb is: Smaller the casino, dumber the players.
So as a retail trader with under 20 sol in your account, you have to find coins under $10m marketcap. You can go as low as $1m market cap but then you run the risk of one whale selling their coins and you get rugged.
This is an example how I got rugged on CortexZero. The project seemed good(fundamentals okay, token holder bubble map was fine) but turns out it was a scam(?)
As you can see, I added to my trade and then instantly cut for a loss as the liquidity started drying up.
So yes, $10m market cap is an ideal spot for a new trader to be saved from rugs(mostly!).
So now you know that you need to find tokens that are between $10m-30m in market cap.
Next, you check the bubblemaps, find top 10 wallets and run forensics and find if the wallets are directly or indirectly linked with any rugs in the past.
Next, you need to understand what season it is. This is the discretionary part. From Oct 2024-Dec 2024 we had the AI token season. Liquidity was getting attracted to tokens with a chatgpt wrapper bot and that was your “meta”.
Cryptotwitter is of good assistance in understanding what coins are currently in vogue.
Once you have that, you have to use your standard momentum/trend based strategy and stick to it rigorously. That means predefined stops and risk(or size so low you would not need stops), profit targets at backtested intervals based on the current meta.
I do not recommend copytrading big wallets(that works sporadically), however tracking a few wallets who “get” it and then adjusting your betsize based on it has been +ev so far.
If there is more interest in how to develop your edge, I can write a supplemental article later.
Step 1: I have an edge, what next:
Once you have your scanners, momentum strategy and a pack of cigarettes set up, you now have to execute.
For execution platforms on Sol, you can use Photon. You can also use Jupiter or any other dex. Please do not use phantom or moonshot or any other platform that charges an egregious platform fee.
Setup an auto trade management system. You do not want to be staring at the chart for more than 10-15 minutes a day. Use volatility metrics to find what is the vol of the token you are trading. BTC is roughly 90-100 vol so adjust your risk based on the vol of your instruments.
Bet sizing: Unlike traditional markets, using kelly criterion is not the best way to betsize in altcoins.
Is it just vibes Algo?
Well, yes and no. Ideally the max position size should be 1/10th of the largest wallet unless you have ultra high confidence in the project(The trump token was an easy homerun). But those opportunities are few and far in between.
Minimum betsize should be 3% of your account size. This helps you not take marginal trades or derivative tokens that just graduated from pump.fun or long dead tokens.
Step 2: Long only. No shorting memes.
Unless you are a great trader like Martin Shkreli and can bear huge drawdowns.
Do not short memes. Only exception is if you get a parabolic exhaustion and then you have to time it really well etc so just ignore it and “NO SHORTING”.
Step 3: Make it worth the hassle.
What do I mean by that. All the time, energy and effort you put into this, you should execute your edge like a pro and end up with profits that are more than if you worked an entire shift at chipotle.
That’s it. There is no step 4. Now go get to work and win at this game. All the best.
-Fin