Memecoin trading is risky but rewarding if done right.
The memecoin season is taking a little break now, but don’t be fooled: memecoin trading isn’t going anywhere.
CoinMarketCap will help you prepare for that with 5 tips on how to trade memecoins, a topic we covered in the latest CMC Live episode from Travladd Crypto, a memecoin trading veteran.
Fasten your seatbelts, this rollercoaster is underway!
Tip 1: Never Stop Learning
Many thought that after the big Dogecoin pump in the last bull market, memecoins were done. But then came the big Shiba Inu run. And then came the bear market with new memecoins pumps.
According to CoinMarketCap, the total market cap of memecoins at the time of writing is $14.3B. Of course, there are many other cryptocurrencies, which promise a more serious approach. But memecoins promise the highest rewards (and the highest risks). So if you really want to dive into the deep end with trading memecoins, education is paramount. In the words of Travladd Crypto, a recent guest on CMC Live:
“Memecoins are never going to go away[…]education is extremely [redacted] important.”
Very [redacted] true. This article can be your first step to educating yourself about memecoins, but it should definitely not be the last.
Tip 2: Don’t Fear the Ban Hammer
Some people can get apprehensive about trading memecoins because of their dubious legal status.
“It’s all a casino,” is one of the most common judgments for memecoins.
An unregulated casino on top of that. That is partially true, but it needn’t be a bad thing. After all, regulation is coming sooner or later, with the SEC moving in on many different cryptocurrencies. Regulated crypto will probably make less money than unregulated crypto, but it will also be less risky.
So regulation, if applied well, may prove to be a good thing, even for memecoins.
“Regulation is required to an extent,” as Travladd Crypto aptly put it.
Tip 3: Only Risk What You Can Afford To Lose
This one should go without saying. But if you have not read our guide to managing emotions while trading, you can probably do with a reminder.
Never risk more than you can afford to lose.
Your memecoin share of your trading portfolio should be no more than 10%. If your entire net worth is tied to illiquid memecoins, then something is going very, very wrong.
Tip 4: Do Your Research and Due Diligence
It cannot be stressed enough. Research and due diligence for memecoins are double, triple and quadruple as important as they are for “normal” coins. Luckily, you have a few great tools at your disposal.
For example, you can use the CoinMarketCap DexScan to check whether a memecoin’s liquidity is locked and what its trading history looks like. Unlocked liquidity screams rug pull, and you need to be careful to not fall for that!
Finally, you should audit a memecoin’s social accounts and its CMC Community profile, if it has one. A profile without much activity and regular updates is not what you are looking for.
Tip 5: Don’t Fall for These Tricks
Maybe you already know the basic red flags to look out for in a memecoin, such as unlocked liquidity.
But did you know that there are many more ways devious devs can pull the rug on you?
Travladd Crypto shared a few in his interview on CMC Live:
- The smart contract can have a function where new tokens can be minted and sent to the contract deployer.
- The token’s liquidity can be drained through whitelisted addresses.
- The deployer can spoof liquidity through botted trading in the beginning and lure unsuspecting traders into honeypot.
In short: a lot more can go wrong than just rugging a contract’s liquidity. That is why it is paramount to check the contract address with a tool like Dexscan.
Final Tip: Always, Always, ALWAYS Manage Your Risk
If you followed the VCs, checked the coin for possible traps, did your research and due diligence, and made sure you are not trading from your main wallet, congrats!
You are at the final boss: yourself.
Many traders have lost fortunes because they could not handle the paper gains from memecoins. Always manage your risk and go into a trade with a plan. As they say, failing to plan is planning to fail. That is especially true for trading memecoins.
If you want to learn more about memecoin trading from a pro, listen to the CMC Live episode with Travladd Crypto, a veteran memecoin trader. Good luck anon, you’re gonna need it.
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