Strategy description

This strategy leverages TrendMoon social data and market metrics to identify and trade emerging memecoin opportunities on Ethereum. By aggregating social attention around each individual token, the strategy combines data on social mentions, mindshare, and sentiment to detect new trends forming in the market. This approach works particularly well for social tokens and memecoins, as their value is heavily driven by social activity.

The strategy uses a combination of social metrics and additional market indicators, such as trading volume and momentum, to determine optimal entry points. By identifying periods of rising social interest and confirming momentum through market data, it captures upside potential while implementing risk management measures to protect against downside risks.

• Analyzes social mentions, mindshare, and sentiment to identify tokens gaining traction.
• Confirms entry signals with volume and price momentum indicators to validate trends.
• Implements robust risk management with stop-losses and trailing stops to secure profits and limit losses.
• Targets high-potential memecoins with sufficient liquidity and trading volume.
• Makes trading decisions on a daily basis, with automated execution and risk safeguards.

This strategy is designed to perform well in times of Bitcoin bullish momentum and even during sideways markets when memecoins show positive trends. It is less effective in downturns, but risk management measures help mitigate losses.

Past performance is not indicative of future results.

Assets and trading venues

• Trades only on the spot market.
• Focuses on memecoin tokens on Ethereum.
• Maintains reserves in USDC stablecoin.
• Trading is executed on major DEXes (e.g., Uniswap, Sushiswap).
• Strategy decision cycle involves daily rebalancing.

Risk

Key risk management features:

• No leverage used.
• Strict liquidity requirements.
• Multi-layer risk assessment to closely monitor:
  • Technical (price-based stops).
  • On-chain (token contract risk scoring).
  • Tax analysis (buy/sell tax limits).
• Position size limits and dynamic position sizing according to liquidity.
• Automated stop-loss monitoring on hourly timeframes.

The strategy performs best in bull markets or sideways markets with active memecoin trading. Performance may be reduced in bear markets, though risk management features help protect capital.

Backtesting

The backtesting was performed using historical memecoin data from Ethereum DEXes between 2023-2024.

• See backtesting results
• Read more about what is backtesting.
• On-chain risk scoring was not included in backtesting results.

The backtesting period covered both bull and bear markets. The backtesting period saw one bull market memecoin rally from bear market lows that is unlikely to repeat in the same magnitude for the assets we trade. As such, past performance should not be used as a predictor of future returns. Backtest results have inherent limitations, and there will be variance in live performance.

Profit

The backtested results indicate 684.39% estimated yearly profit (CAGR).

This return is based on the strategy's ability to capture upside from emerging memecoins while mitigating severe drawdowns compared to simple buy and hold.

Benchmark

For the same backtesting period, here are some benchmark performance comparisons:

	CAGR	Maximum drawdown	Sharpe
This strategy	684.39%	-23.07%	2.11
SP500 (20 years)	11%	-33%	0.72
Bitcoin (backtesting period)	76%	-76%	1.17
Ether (backtesting period)	29.61%	-45.27%	0.95

Sources:

• Our strategy
• Buy and hold BTC
• Buy and hold ETH
• SP500 stock index

Trading frequency

The strategy is a relatively low-frequency strategy compared to other memecoin traders.

• Rebalances daily.
• Average duration of winning positions: 9 days 8 hours.
• Average duration of losing positions: 1 day 22 hours.
• Average positions per day: 0.33.

Portfolio management

• Holds a maximum of 7 concurrent positions.
• Allocates 14.2% of the portfolio per position.
• Positions are sized based on available liquidity and overall market conditions.
• Maintains reserves in USDC as a safety net for opportunities or in case of risk events.

Robustness

This strategy has not undergone extensive robustness testing across different market cycles, but it has been stress tested against recent data with significant market volatility, from the start of 2023.

Updates

This strategy is one of the early social-data-driven memecoin strategies on Ethereum.

As the market evolves, it is expected that newer versions will be developed. Stay updated by following us for updates to make sure you are trading with the latest and most optimized strategy.

Further information

• Strategy uses TrendMoon social data integration for social trend detection.
  • Join our Discord community chat for questions or more information.
  • Check out our Telegram channel for the latest discussions and insights.
  • Visit our website to learn more about TrendMoon.
  • For all our resources, check our link tree.
• Automated execution with no manual intervention required.
• Strict filters for excluding high-risk tokens.