This guide is written by our team member Tuna to serve as a beginner's guide to the competitive world of on-chain trading, AKA “the trenches”. We hope that with this guide, newcomers can gain a good understanding of how the market works and waste less money on unnecessary mistakes.

The guide will is written in two parts. Most of it focusing on the Due Diligence aspect of onchain trading to help our readers pick out good memes. The rest of it is some bullet points on the trading aspect (also known as execution) with a link to CoinGuru’s guide on doing technical analysis for memecoins.

Disclaimer: We do not endorse the tickers mentioned in this guide. They merely serve as examples.

Due Dilligence

Being able to identify a good meme and understanding how high it can go is 90% of the game. Think of it as finding your win condition in a video game.

Win Conditions

Win conditions are objectives that need to be met in order to obtain victory. Here’s an easy example:

In League of Legends, your win conditions are:

• Feeding your carries

• Taking strategic objectives (dragons)

• Obtaining economic advantage (farming more minions)

So, in the end, you can use those to put pressure on the enemy and take out their base.

For on-chain trading, to paraphrase the legendary trader GCR, you should think of your coins as prizefighters competing to capture other traders’ attention. In order to find the coins that will capture maximum mindshare, you need to assess whether a coin possesses the following attributes (win conditions):

• Meta

• Meme virality / Cult-forming ability

• Influencer adoption

• Liquidity

• Dispersed token distribution

Meta

Meta stands for the most effective strategy in the current game version. Understanding the meta gives you a basic understanding of which tokens have a larger chance of attracting liquidity. It also helps you filter out low-quality derivatives as the market matures.

Meta in the trenches takes into account several things:

• Specific themes

  • Dogs

    • Doge

    • WIF

  • Cats

  • AI

  • PoliFi

    • boden

    • MAGA

• Liquidity condition

  • Before November 2023 memecoin liquidity was concentrated in Ethereum mainnet

  • After Bonk went parabolic, memecoin liquidity has mostly shifted to Solana , and Ethereum mainnet memecoins have been relatively dormant ever since

  • Some liquidity is shifting to Base Chain, but it’s unclear if that is a meta-shifting event

• Specific influencers

  • Elon Musk (popular in late 23’)

    • GFY

    • Grok

  • Ansem (@blknoiz06 on Twitter)

• IRL events

  • 2024 US election

While buying coins that are part of the meta should give you a higher win rate than non-meta coins, a golden rule to remember is that you should always focus on the meta leaders. That’s where most people's attention is concentrated, and derivatives are simply hitchhiking.

Meme Virality & Cult-Forming Ability

This should be the priority above all else in your due diligence process and would make a night-and-day difference in how fast the meme would spread among Crypto Twitter.

There are several ways to identify how viral a meme can be:

• Does it make you laugh?

  • boden

  • BITCOIN (HarryPotterObamaSonic10Inu**)**

• Is it an existing meme on social media? How big is it?

  • Doge

  • WIF

  • Popcat

• Is there a tagline for the coin?

  • WIF: The hat stays on

  • Retardio: Retardio (added at the end of a tweet)

• If it’s an event that just happened, does it stir up emotion among people?

  • Only put money in memes that evoke positive emotions

  • GFY: Elon telling advertisers to ‘go fxxk yourself’

  • Slerf: Token deployer sent all 10 million dollars raised from presale into LP and burned it all

• How easy is it to make more memes using the core concept

  • boden

"These benchmarks are good for filtering out 95% of the new pairs launched every day. However, to go from good to great takes more than checking a list. Nothing is more valuable than time in the market, so keep grinding.

Also, no amount of presale will make a bad meme good.

Influencer Adoption

Influencer adoption is downstream of the quality of a meme: The better the meme, the more likely reputable influencers will adopt it. That’s because high-quality memes have a bigger TAA (Total Addressable Attention), and their followers face a lower risk of losing money.

One thing to note about influencers is that endorsements are only boosters to get the coins to where their fair value is based on the TAA. Oftentimes, the endorsement of a big influencer might even mark a temporary top as the maximum mindshare has been achieved. So don’t FOMO into coins just because they’re mentioned by your favorite influencers.

AND ALWAYS STAY AWAY FROM PAID CALLERS

It is important to add traders with styles different from yours to your timeline to curate a feed that captures opportunities across different genres and chains effectively.

Liquidity

Liquidity here is mostly referring to chain liquidity.

There are 10 chains with over 1b in TVL, but there are only so many on-chain traders, and even fewer creative memecoin developers. As such, memecoin activities are normally concentrated in 1 to 2 chains, which are currently Solana and Base (ETH and BSC in the last cycle).

While pockets of liquidity may appear throughout the cycle, most of the activity will be concentrated on the aforementioned chains. If you’re just starting out as an on-chain trader, the chance of hitting a good coin is much higher on a chain with abundant liquidity.

If you do want to take part in newer chains, I recommend only focusing on their mascot coins.

Dispersed Token Distribution

In most situations, you want the distribution to be as spread out as possible, with no single address holding over 2%.

In very rare cases, highly aligned whales and influencers cornering supply can be a good thing.

Sometimes the deployer of a memecoin or an early sniper may send their tokens to multiple addresses to give the illusion of good distribution, so always use scanners to check if top holders are actually from the same cluster.

The most frequent pattern is multiple addresses belonging to the deployer holding a similar amount of tokens.

Example:

Execution

Execution can be boiled down to “don’t fomo” and “buy low sell high”. Here’s a few bullet points that I use to keep myself in check.

• Buy when no one is looking, sell when everyone is euphoric

• Scale out of your large positions with DCA, if it’s available, to avoid slippage

• Basic technical analysis will suffice (highly recommend this guide from Guru)

• Undersizing > Oversizing

• The volatility is enough for substantial return, don’t overtrade your bag.

• Size your bet based on both conviction and your dry powder depth, not just either one

Conclusion

Hope you found this guide to be helpful.

If you want to have a deeper conversation about the guide or the market, you can find me here.

Last but not least, trading on DEX frontends is handicapping yourself in this market. Using a telegram bot to trade on-chain is a must, and I highly recommend you to start trading with Alfred today!