The Only “Safe” Way To Trade Memecoins

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18 Jul 2024

Always An Opportunity
Despite memecoins taking somewhat of a backseat recently, trading opportunities continue to arise within this volatile Crypto sector. These are usually in the form of more trusted and well-established memecoins and newly released memecoins, which usually enjoy an initial pump, even if their eventual end is a rug pull or complete collapse. This is the sector where fortunes are made and lost daily.
I was never much of a memecoin fan but began trading memecoins in December of 2023. I have identified several significant wins during this time, which has encouraged me to continue my speculative adventures within the unpredictable world of memecoins. Waiting for significant corrections on some of the more established, yet micro-cap memecoins is a great strategy to practice.
I have steered away from trading newly released memecoins, as the relativity ratio regarding rug pulls has peaked significantly in favor of the charlatans, making it an unprofitable strategy. Scam projects are becoming increasingly convincing regarding their presentation and packaging, and as a result, are difficult to discern. It’s better to trade more established projects with adequate trading history and volume.
The Golden Rule
I have often addressed risk management and the effective deployment of capital as key disciplines to master. Understanding and implementing these disciplines appropriately can save an investor from significant losses. This becomes even more important when trading memecoins. The fact that this particular market is dangerous and volatile does not negate these practices but rather reinforces them as absolutely imperative.
When trading memecoins, I find capital deployment the most important practice to implement. This is after a potential asset has been identified and has met the criteria of your risk management profile. Effective capital deployment in simple terms is to avoid allocating 100% of your investable capital in a single allocation. Choosing to stagger your allocations in conjunction with the price action of the asset is a great way to mitigate risk.
Greedy investors look to squeeze as much as possible out of a single trade and often suffer significant losses in the event of a rug pull or 80% correction, which often occurs, even regarding legit memecoins that have a “guaranteed” future. A modest initial allocation will be profitable if the asset ascends from entry. However, if it corrects, investors require additional capital to reduce their entry price.
Essentially, memecoin investing is about building positions via staggered capital deployment, selling local tops, and repurchasing lower. This increases the size of the investment over time, while also reducing the entry-level. If you allocate 100% in a single allocation, you stand the chance of being the bagholder at the top with no hope of resuscitating your trade. Either, the asset rallies significantly, or you are dead in the water.

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Final Thoughts
This sounds like a lengthy strategy. However, the memecoin market moves fast. Chart formations that often require weeks and months to unfold in traditional Crypto assets can unfold within a week in the memecoin space. Regardless of the asset, sound investment principles remain pertinent regarding investment success. Memecoins are no different. It’s a risky sector but it can produce stellar returns. Exercise caution and I will see you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.