How To Stop Buying The Top.

Sorry to break it to you, but your favorite coin can't pump forever. There, I said it.

It shocked me too when I learned the hard way in 2022. (I thought it was smart to park 80 percent of my portfolio in Bitcoin because it was headed to Mars). 😂

I’m more experienced now, and one of the reasons this newsletter documents my embarrassing fails is so others can learn from them. So bite me. That coin you swore you’d hold forever? It will eventually dip.

Here’s the good news, though: if you plan your entry and exit properly, you’re in the clear. Smart traders understand that volatility is the name of the game. If you know how to make it work to your advantage, you might as well be Dr. Strange on the charts.

Last week, we had a nice chat with DeFi Princess about crypto market fundamentals and creating a good research system to identify breakout trades. She talked about how narratives act as catalysts to move crypto markets. Our conversation got me thinking.

How do you figure out what to look for? A great scouting system gives you the first-mover advantage before people start pushing hashtags all over Twitter. Plus, there’s a zero percent chance of getting dumped on when you’re your own alpha caller.

So I researched the best way to build a system to sniff out these trends!

Create a watchlist

Web3 is a wide ecosystem. You want to start by dividing the platforms and protocols into clusters, separated by niches. Group similar themes together.

For example, a DeFi cluster would include the likes of lending and borrowing protocols, automated market makers (AMMs), and decentralized derivatives.

Coingecko is a great tool to identify and create these groups using the “Categories” filter. You can also watch your custom clusters on TradingView or DexScreener. Another great way to organize your watchlist is with Sandwich Finance.

This allows you to watch each sector and compare their performance relative to one another. Once you identify your top picks, set alerts at key levels to get the scoop when trends begin to shift.

Choose a framework.

No matter what indicators you use to navigate the charts, you will be working within a framework. This allows you to determine whether a coin is trending up, down, or sideways.

A handy trick that the most observant traders use is to watch the leaders of a sector. If they’re doing well, some of that heat rubs off on coins that are in their niche.

As the image above shows, AGIX has been doing quite well and is up 30 percent over the past week. Let’s check out how other AI-themed tokens are performing within the same time frame.

The data shows us that these coins are trending in a similar direction as the leader of the pack, AGIX. Note how none of them is performing as well as AGIX.

This is because the AI narrative has been played out over the past few weeks. When this happens, the weaker tokens are going to gather less steam.

The sooner you can identify a trend, the more profits your trades are likely to generate. But also note that early moves are associated with higher risk!

Watch out for relevant news.

This is the part where you circle the internet like a hawk, searching for all the latest developments that could trigger new trends. The good thing about having a watchlist is that your efforts at this stage can be streamlined for maximum efficacy.

Relevant news events are called "catalysts" by author. Examples include protocol upgrades, new product launches, strategic partnerships, etc. Web3 moves at lightning speed, so it can be tough to keep track of the news.

Lucky for you, I publish a weekly market roundup every Monday. It summarizes the most significant developments in the cryptocurrency world. Here’s a list of some great resources (in no particular order):

1. - daily rundown of crypto and NFT news.

2. Seed Phrase Daily - a daily dose of the latest trends in Web3.

3. - frequent and well-segmented updates on crypto and NFT markets.

4. - a monthly deep dive into relevant crypto market events.

5. Blocmates - DeFi news and insights, twice a week.

Another powerful way to find your own news is to curate Twitter lists, but that’s a topic for another day. Using tools like Notion to organize your schedule helps you stay prepared for upcoming events.

Smart money gets into position before the catalyst occurs.

Train your mind to take action!

You have a watchlist. You’ve identified a trend before it happens. You’re ready to take the trade. The moment has finally come to strike while the iron is hot.

90 percent of the people who read this will not take any action on the tips here. Of the 10 percent that do follow through, I expect only half to really capture the magic of this system.

Why?

Seeing a news event and thinking, “What is the trade here?” is a skill. If I had a dollar for every time I saw a play after the trade opportunity, I would have about $99.

Reading the interview with DeFi Princess is one of the best steps you can take, if you’ve come this far. Even if you read it already, I recommend giving it a few more takes.

She described DeFi as a game of “eat or be eaten.” The more you think about it, the more it makes sense. As a small time retail trader, or absolute noob, you’re swimming with the sharks and whales. You need to stay strapped up in order to survive.

I hope that between the last two issues of this newsletter, we have provided you with some real value to supercharge your crypto trading experience. Please take the poll above, and feel free to drop a comment with some feedback or questions!

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.