Original author: @Shanks_A9z
Reprinted: Oliver, Mars Finance
Preface:
We still need to communicate to realize that some issues are pain points.
In fact, many people are troubled by how difficult it is for small capital to grow; this difficulty seems as daunting as climbing to the sky.
But it’s not that simple; to grow a small capital or to enter the primary market, the most important thing is to establish your own trading system. (I feel a bit annoyed with myself as I write this sentence.) Everyone can talk about this great principle, but very few discuss the real situation and how to establish a truly clear trading system.
It's okay, I'll explain and write. My writing style has always been quite straightforward, and perhaps many places are phrased improperly, too blunt without any nonsense. But there's nothing wrong with that; this market needs someone to write about these things.
Additionally, this article has a lot of text, which may seem a bit troublesome to read. Friends who are familiar with me should know that when I write, practicality and the ability to actually implement are my top priorities. So I think this article is still extremely valuable. If you feel confused, be a little patient, read it carefully, and you will gain something.
I will combine my experience and insights to write about the specific strategies and paths to grow from several hundred U to over 1,000,000 U.
As of now, I still haven't fully grasped A8; in fact, I’m quite inexperienced and cannot compare to some of the more capable seniors. So, I lack concrete experience on the path to A8.5 and A9, and therefore cannot write about it.
As for my journey, I believe I am not very successful yet, so I won't write about it for now. Let's wait until one day I cross 5 million U and then I can brag about it.
Enough small talk. For retail friends with small capital, how small is it? Some are a few hundred U, while others are slightly more, ranging from 1K to 10K U. Let's start with 300U. So this article can be regarded as a real pathway strategy for the primary MEME market, from 300U to 1,000,000U, which should help everyone avoid some detours.
(Additionally, all the computed data and processing in this article will definitely have deviations; the data calculations are merely one standard for assessing pros and cons.)
I. Data Organization (Using PUMP as an Example)
Let’s start with some data analysis.
On April 15, 43,271 MEME tokens were born. However, the number of tokens that graduated (fully launched) was only 408.
The graduation rate is only 0.94%, less than 1%, with 99% of tokens dying in the internal market.
The data for the full launch of 408 tokens is as follows.
II. Thorough Understanding of Strategies
Strategy classification is simply: many/few trades + pursuing high/low profits.
Combining these will yield the following four strategy models:
1. Many trades + pursuing high profit margin models
2. Many trades + pursuing low profit margin models
3. Fewer trades + pursuing high profit margin models
4. Fewer trades + pursuing low profit margin models
Next, we will thoroughly quantify the situation and pros and cons of these four strategies from a mathematical perspective.
Since this article discusses strategies for small capital startups, the following analysis will be based on 300U (my initial startup capital was this amount) for myself. As for strategies for larger amounts, i.e., from 10,000U to 200,000U, and from 200,000U to 1,000,000U, I will discuss in the later text.
If it is 300U, it is currently 2.4 SOL, so let's calculate it as 2.5 SOL.
Let me clarify the issue regarding profit percentages. Due to GAS and bribe fees, if you sell 0.1 SOL each time, the cost of each transaction (calculated at standard speed) is about 0.005 SOL. If you want to break even, you also need another selling transaction, which incurs the same cost of 0.005 SOL. The total cost for two transactions is 0.01 SOL. This means after buying, you must have at least a 10% profit to break even on the total sale. If the profit on your books is below 10%, you are at a loss.
1. Many trades + pursuing high profit margin models
For convenience in calculation, we will not consider trading costs for now. Since this involves many trades + pursuing high profits, let's say within a day's time, you have 2.5 SOL, each trade at 0.1, and you make 25 trades. No stop-loss operation is performed in pursuit of high critical hits.
If you adopt a strategy that doubles your capital, and you make 25 trades wanting to eat back your investment profit, you need to hit a high critical point at least once. This time, the required increase is 4800%, which is 48 times.
If you want to achieve such multiples, there is only one path: buy in the internal market (among 43,271 tokens) and invest in tokens with a market value exceeding 100K (16 tokens). You have 25 chances, and according to calculations, you only need to hit once for a break-even probability of 0.92%, corresponding to a loss probability of 99.08%.
If you do not adopt a strategy of doubling your capital, then the required increase this time is 2500%, which is 25 times.
Calculating based on average market value (the average market value of 53K-100K is 76.5K, which corresponds to needing to enter at 3.06K, but the initial market value of PUMP is already 3.8K), so you still have only one path: from the internal market to exceeding 100K, and after calculations, your probability of breaking even remains 0.92%. If you include the 95K market, your probability of breaking even is approximately 0.92%-2.06%. The corresponding probability of loss remains around 98%.
To summarize, why does this situation occur? Why is your probability of loss so high? The reason is simple: your capital is insufficient. By insufficient, I mean you do not have at least 500 SOL.
Those who frequently participate in PVP often do not tell you that they hold over 2,000 SOL in their dog trading funds, yet they only place 2 to 10 SOL in each trade. They have enough capital and patience to catch their own critical strike, covering all losses, and even making a large profit. Mathematically speaking, this scale of funds adopting this strategy is the most suitable.
For small capital to adopt this strategy, unless your luck and talent are extraordinarily exceptional, as a beginner, it is very difficult to buy super high-multiple tokens from over 40,000 tokens and hold on to them until the end; otherwise, you will gradually lose all your capital.
2. Many trades + pursuing low profit margin models
When playing on PUMP, the average price increase is about 663%. We set the profit-taking points between 15% to 100% as low profit margin settings.
In fact, any space can accommodate our 100% profit. This means there are many different scenarios.
(3.8K~53K) is the internal market. When you buy in, the most feasible strategy is to call others to join you. For low profit margin take profits, you need to run after several tens of points.
This is relatively easy to achieve because the market value of the internal market is low, and it requires a low buy order to drive up the price. In the current situation, if you want to double your investment in the internal market, you only need to call in about 4000U worth of buy orders. This is roughly 40 people. This is not difficult; once you’re in, you can post in various groups, especially high-quality groups, preferably with narratives that can FOMO others. This strategy is also something some people have been doing after thoroughly quantifying and understanding it.
(53K-100K) requires a relatively large buy order, which means you need to call in more people to take your orders. The conditions are quite strict now, and the number of people you need to bring in can't be done just by sending messages in groups; it can only rely on your own understanding to make a choice. However, we are only discussing the mathematical probability here, excluding experiential factors. Therefore, playing this model during this period is very difficult. Moreover, everyone knows about the PUMP; if it doesn't launch, it's fine, but once it does, it will pour out to the majority instantly. The gold content of this segment is almost negligible.
What usually constitutes the price increase in the (100K-500K) segment? 1. Small players. 2. The authenticity of the narrative (a bit of a hook and a certain level of dissemination is enough). We cannot rely on the buying power and following of others' small players, so we are left with our experience and judgment regarding the narrative. Again, excluding this factor, let's see how the data works mathematically.
According to the data, we can see that there are 16 plates above 100K, among which 50% did not exceed 500K, and the rest exceeded 500K, reaching over 1M. This number is quite remarkable. If we trade each time, the winning rate is about 43%, and the rough total profit sums up to around 125%~675%. Does this conclusion surprise you?
(500K-1M) + (>1M). These two are of the same type. To reach this range, three conditions for the price increase are required: 1. Large players entering the market. 2. Market makers. 3. Narratives at T2 level or above. Similarly, whether or not large players enter is an uncontrollable factor, unless you are their close associate. That leaves us with two factors: determining whether there is a market maker and assessing the narrative and its dissemination.
These two points are also very experiential factors. From a mathematical perspective, if we do not consider the influence of experience factors and trade in all, then your overall profit rate would be approximately 223%~1250%~with no upper limit. The reason for the huge fluctuation in this number is related to your profit-taking points.
3. Fewer trades + pursuing high profit margin models
This category seems to be extraordinarily contradictory. It places extremely high demands on your abilities and experience. Additionally, your experience factor has a substantial impact on this strategy. This strategy will not be elaborated upon; considering it from the perspective of a novice retail investor offers no guidance.
However, it seems that I have bolded two words; if the position you are in is not of a small capital retail investor, then this model at times does not contradict itself. Given sufficient experience and capability, spending time pursuing this model is not a problem.
4. Fewer trades + pursuing low profit margin models
Conditions are as follows: few trades (controlled between 1 to 3 times), low profit margin, setting 100% as the profit-taking upper limit, with profit points ranging from 25% to 100%. The amount for each trade is 0.5 SOL.
In this model, due to the numbers, 100K is an important watershed. We merge intervals and set the upper limit of intervals greater than 100K to 5M.
Understanding this situation, we begin to calculate our expectations for fewer trades (averaging 2 times, each at 0.5 SOL) + pursuing low profit margin models (averaging 62.5% profit-taking) in these two ranges, as shown.
I don't know if you realize that this data is enlightening. Why? Because in the range of 100K to 5M, your probability of profit actually reaches 99.67%. You may not feel it strongly, but conversely, if you enter a trade in this range, mathematically, your probability of failure is only 0.33%.
Indeed, fewer trades + pursuing low profit margin models is the optimal solution among all strategies.
Summary: When starting with small capital, excluding the impact of experience and ability factors, the following four situations emerge. The data in the chart is more closely aligned with reality and has a broader coverage.
III. Cleverly Understanding Trading - Mental Account
None of the previous discussions have mentioned the mindset, which is a crucial factor affecting trading. Why is that? Please let me explain it to you.
At the very beginning of this stage, as a small capital retail investor new to this market, apart from setting up your capital account, I will introduce another account for you - the mental account, which is extremely important. Since it is an account, I will talk about the benefits and drawbacks of increasing and decreasing the mental account.
The adverse effects of a deteriorating mental account due to a vicious cycle.
Many people's experience is that after entering this market, they see the wealth myth. They imitate others and start to panic and rush in the market, constantly fantasizing about catching the next 10X or 100X. Running around everywhere, continuously incurring losses, always cutting losses. In this process, your mental account has never grown, but has been consumed, increasingly losing courage, doubting yourself and becoming less confident.
When you have failed consecutively many times, why would you still dare to place a bet to win the next time?
Being influenced, there is an inertia to think that small funds must pursue extremely high multiples from the very beginning, disregarding those relatively certain speculative opportunities. Dog trading has never stopped, yet has never seriously considered what kind of strategy suits oneself, nor has it clearly quantified what specific strategies are reasonable and executable.
Not knowing anything else, I only know one thing: odds outweigh everything. Thus, without ever having deeply thought about my trading system, I ultimately fell into an infinite downward spiral of death, retreating in silence.
It is tragic when this happens. Imagine one day, after going through countless hardships, you really stand in front of the dragon. You seem to realize that if you swing your sword, you will reach the heavenly realm. However, your sword is already decayed, and you have exhausted the initial courage and spirit. Even if you swing that sword, you cannot sever the dragon's high head, or perhaps you do not even have the courage to swing it.
When you read this, I hope you stop and think back on my analysis and seriously contemplate what specific strategies you should adopt.
The benefits of a well-functioning mental account.
It goes without saying. With confidence, you become more and more self-assured, no longer experiencing internal struggles. Your mood improves greatly every day, making it easier to think calmly. When facing big opportunities, you will understand them more easily and will dare to take action. Numerous benefits, no need to elaborate.
IV. Detailed Execution of Specific Strategies
How exactly should it be executed? Here, I will explain it in detail for you.
Specific strategies for 350U~200,000U
First, rigidly divide your 2.5 SOL capital account into two categories: the first category is the trading account, where you put in 1.5 SOL.
Control each trade to be within 10% of the total amount in this trading account, i.e., 0.15 SOL.
At the very beginning, it's best to start trading with MEMEs that have successfully formed a bottom. For instance, casually mention recent tokens like $RFC, $DARK, etc. Begin to follow the trend for swing trading. Opportunities are few each day, so be patient. Otherwise, the probability of loss will be quite high. Wait for a good position to enter and take profit after a rise of several points. Strictly control your hands, and do not pursue high profits.
Continuing this way will continuously accumulate your experience and grow your mental account.
The remaining 1 SOL should be placed in a reserve account. The amount in this account should not be frequently moved; this account is to train your judgment ability regarding large-scale certainty opportunities.
What constitutes a large-scale certainty opportunity? This doesn't happen very often, so let me give a few distinct classic examples. For instance, in November, Binance suddenly announced the launch of ACT, and the price surged 25 times in one afternoon after the announcement. Then came the rise of AI, where leading tokens all surged on that day. Trump suddenly released a coin that day.
Whenever faced with such situations, make your judgment and then buy 30% of this account.
Once you can consecutively hit more than three times, you will have a preliminary ability to judge such events. After that, when you encounter similar situations, you can choose to go all-in with this account and keep rolling the funds.
Continue executing this strategy, and your capital will grow from 300U to 200,000U.
Strategies for 200,000U~1,000,000U
After A7, your mentality will experience a tremendous sense of achievement. Withdraw 50,000U to relax and satisfy your material desires, and your mindset will greatly elevate, believe me. You will no longer be troubled by various trivial matters in life. These aspects will greatly enhance your mental account.
At the A7 stage, the situation is that your mental account is very strong, and you have considerable experience. At this time, you need to calm down and think more.
One path is to reduce your number of trades and participate more in established MEME trades, thinking and searching for opportunities daily. But please remember, once you have this money, do not go all-in, do not go all-in, do not go all-in!! Use 20% for trading. Circulating 150,000 U in this way can definitely cross 1,000,000 U.
Another path is PVP, investing in new coin offerings. Your capital is sufficient for trial and error, and your mental account reserves are ample. You can cover all losses or make significant profits through enough trades.
5. Some final casual remarks
It seems that MEME has been divided into two eras: the pre-Trump era and the post-Trump era, which is now.
Those who profited from Trump pulled out massive liquidity, enjoying life and even retiring. Meanwhile, those who missed out continue to struggle in this market every day, often hitting walls, working hard but gaining little.
I am not very good at lengthy psychological massages. For me, a phrase that has always motivated me is: the market always emerges from despair.
Let me share a bit of my experience. At the end of 2023, during another market, the liquidity was completely drained, and that was my low point, filled with confusion about the future and discontent with myself.
I am extremely angry, very unwilling, and I hate myself. Why am I not the one making money? Why do I always lose money? Why can't I have the life I want? Why didn't I seize any of those opportunities?
But I feel that my difference lies in the fact that even when I was desperate at that time, I still insisted on staying in the market. I was trying to verify: the market always emerges from despair. Is this statement true or not?
Later one day, I hit the mark. I boarded the salvation chariot that always emerges from the desperate market, riding the wind, and I survived. I don't think I had any special skills at that time; I just had a bit more perseverance.
Do not say there is no transformation in the world; the secret lies deep within the abyss.
