The "Trench Trading" strategy is a fast-paced decision-making investment approach characterized by high risks and high returns.
Author: arndxt
Translation by: Deep Tide TechFlow
Below 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-volume trading markets.
By summarizing the lessons learned from "Trench Trading," this blueprint will guide you on how to trade Meme coins, seize AI-driven trends, and stand out in high-risk, high-reward opportunities.
(Deep Tide Note: "Trench Trading" is derived from "trench tactics," where soldiers dig trenches to protect themselves while seeking breakthrough opportunities under extreme pressure and danger. Here, "Trench Trading" describes how investors need to be well-prepared like warriors in certain highly volatile and competitive market environments, including research, strategy, and discipline, to respond to opportunities and risks that may arise at any moment.)
(The original English table is from @arndxt_xo, translated by Deep Tide TechFlow)
1. Introduction and Mindset
The "Trench Trading" strategy is a fast-paced decision-making investment approach characterized by high risks and high returns. In this model, you need to face microcap tokens, Meme narratives, AI-related topics, and breaking news. These factors can elevate a token's market cap from 15k to 10 million or even higher in just a few hours.
Key Mindset Shifts
Embrace Volatility: You are not trading stable large assets, so gains or losses can fluctuate dramatically overnight.
Stay Rational: Maintain calm judgment even amidst the frenzy of Meme coins.
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 high-volatility markets, knowing when to decisively buy and when to cautiously observe is crucial.
7–15k: Initial Stage
- This is the entry point for extremely low market caps. 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 risks.
50k: Psychological Threshold
- When a Meme coin's market cap surpasses 50k, it usually 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 hold or even increase 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 indicate that you are paying a premium. It is advisable to enter at this stage only if there are strong catalysts or sustained high trading volumes.
3. The Meme Factor
When trading Meme coins, a token's explosion may rely solely on humor, community enthusiasm, or a viral tweet.
Code Example: For instance, a Meme coin named "Girlfriend = Money Drainer" might skyrocket overnight due to its humorous and relatable theme, resonating strongly with the community.
Community Dynamics: Keep an eye on trending topics on Twitter (now X) or Telegram. If a Meme starts to gain popularity, this seemingly "nonsensical" concept could turn into a real profit opportunity.
4. Narratives and Trends
Narratives are the core driving force behind trading volume.
When the market believes in a certain trend or story, investors tend to flock in.
Common Meme Narratives
Developer Background: If the developer has a track record of successful projects, this is usually a positive signal.
News-Driven: For example, a new partnership announcement, especially if it becomes a hot topic on Twitter.
Elon Musk's Tweets: If Elon tweets about a Meme or AI concept, it often triggers a surge in trading volume, such as with $KEKIUS or $PNUT.
Mascot Effect: New dog breeds or random cartoon characters can become market hotspots.
Before participating, be sure to verify the publication date of the news. If it is old news being rehashed, be cautious 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 points to consider:
Evaluate Project Value through ai16z GitHub Open Source Code: If a project references legitimate open-source code or repositories (such as resources from well-known tech companies or top AI labs), it usually indicates that the project has more real value. ai16z is short for the well-known venture capital firm Andreessen Horowitz, and its GitHub 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, lacking real technical support. These projects often experience rapid price surges followed by significant sell-offs, so investors should be particularly cautious.
Strategic Advice: 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 unless there are sufficient reasons to support further growth.
6. Trading Volume Dynamics
Trading volume is the core indicator of fast-paced trading. When trading volume surges, prices may skyrocket quickly but can also drop just as fast.
High Trading Volume Means Opportunity
- If the project narrative is credible and trading volume significantly increases (such as large buy orders flooding in), consider increasing your position.
Observe the Order Book
- Large buy walls usually indicate strong market interest, while large sell walls may suppress prices.
Whale Effect
- If well-known whales or popular on-chain wallets start buying, it may attract followers, further boosting market sentiment.
7. Strategy and Risk Management
7.1 Entry and Exit Plans
This is a PVP market, and trading is like a game. When you buy, someone else may be selling.
- Set Goals
- Set a rough exit market cap target, such as achieving 2x, 3x, or even higher returns.
- Phased Profit-Taking
- When reaching significant profit stages (such as 2x or 5x), promptly recover your initial investment or realize partial profits to reduce risk.
- Look for Confirmation Signals
- Closely monitor how the chart performs near key price points that the market is focused on (such as 50k, 100k, 1M, etc.) to determine if there are signals for further upward movement.
7.2 Stop-Loss Strategy
Due to high market volatility, traditional stop-loss methods may be ineffective. To reduce loss risks, consider setting psychological stop-loss points (a loss range 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 may choose to continue holding when prices experience significant pullbacks. However, use this strategy cautiously to avoid major losses due to waning market enthusiasm.
8. Consistency and Adaptability
Stay Updated with Market Dynamics: Use tools (like DEX filters), join Telegram groups, or follow Twitter trends to capture new project release information in a timely manner.
Adapt to Market Rhythm: When a large number of new projects emerge and the market atmosphere is active, consider increasing trading frequency; during quieter market periods, focus more on filtering quality opportunities.
Balance Win Rate and Returns: Even if your trading win rate is only 40–65%, as long as you can quickly cut losses and let winning trades grow, there is still an opportunity for substantial overall returns.
9. Example Charts and Visual Aids
Here are some simulated price movement patterns of microcap tokens to help you better understand typical market behaviors.
Chart 1: The "Lifecycle" of a Meme Coin
Early Stage (0–15k): Lack of liquidity, with risks and rewards coexisting.
Mid Stage (50k–100k): Begins to gain attention in the Crypto Twitter community, with investors gradually cashing in on initial profits.
Late Stage (100k–1M+): If hype or major influencers (like Elon Musk's tweets) occur, prices may skyrocket quickly.
Price Peaks: As profit-taking accelerates, prices may drop rapidly.
Chart 2: Dynamics of Trading Volume Surge
Hot News Release (such as news or tweets): Market trading volume surges rapidly in response to news stimuli.
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
The "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 the potential and growth space when entering projects in their early stages.
Verify Project Information: Confirm whether the project is genuinely AI-related, whether it has a real development team supporting it, and whether it is truly associated with well-known figures like Elon Musk.
Monitor Trading Volume and Market Sentiment: Closely track changes in trading volume, observe whether large funds (whales) are entering, and pay attention to positive market feedback and enthusiasm.
Develop a Clear Trading Strategy: Plan exit points, phased profit-taking points, and psychological stop-loss lines in advance to cope with market fluctuations.
Stick to the Plan: In the Meme microcap space, new opportunities emerge every hour, making stability and patience particularly important.
Continuous Learning and Tracking: Keep clicking, refreshing, and analyzing data to maintain a keen observation of the market, allowing you to stay ahead.
It is important to note that trading in these small-cap areas carries extremely high risks. Always manage your position sizes wisely and avoid acting rashly out of fear of missing opportunities. New million-dollar surge projects emerge daily in this market, so there is no need to rush.
May good luck be with you in 2025 (and beyond)!
Seize opportunities, but approach them with a strategic and calm mindset; you have every chance to succeed in these highly volatile "trench markets."
Good luck!
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