How to Trade Memecoins: A Full Guide for Beginners

Memecoins are crypto projects whose fundamentals are built on the meme culture. They are known for their witty and vibrant nature. Memecoins extend the meme culture into the financial space, they attach a flexible value to popular memes by building a brand around this concept. Memecoins feature popular imagery and events, including animals, political figures, social narratives, and sensational internet memes. They are generally known as ‘Community Projects’ to reflect their primary goal of building value through community action and the role played by the community behind memecoin projects.

Some common features of memecoins include:

A community focus: Memecoins are usually built on community activity, featuring high social media activity aided by key opinion leaders (KOLs) and influencers.

Comical and humorous branding: Memecoins are usually branded with funny and relatable imagery based on events, animals, individuals, or stories.

 Volatility: Crypto assets are generally volatile, however, memecoins are known for more intense and irregular swings in value.

Social good: Reputable memecoin projects also engage in charitable activities. Good examples include Dogecoin, Shiba Inu, and Trump.

There are a variety for the exceptional popularity of memecoins, including:

Low barrier to participation: Memecoins are easy to understand and easy to invest in. They open their doors to everyone, making it easier for even mainstream investors to participate.

Viral branding and marketing: Memecoins are known for their far-reaching marketing strategies, for instance, the plan to display the WIF (DogWIFHat) memecoin on the Las Vegas sphere and placement on billboards for memecoins like Apu Apustaja (APU).

Social media influence: Memecoin community members relentlessly shill their projects on social media through comments on (most times unrelated) posts and articles, and proper tweets.

Several memecoin projects have gained huge popularity over the years, some of them include

DogeCoin (DOGE)

DogeCoin (DOGE) was launched in 2013 by Jackson Plamer and Billy Markus. The DogeCoin blockchain is a fork of the Bitcoin blockchain. The idea was to develop an easy cryptocurrency for mining. DogeCoin creators adopted a witty branding for the project with the image of Kabosu, a popular Shiba Inu dog. DogeCoin has since grown into a dominant project in the crypto space, climbing to rank in the top ten digital assets, with a crypto market cap of $18 Billion at the time of writing.

Shiba Inu (SHIB) 

Shiba Inu is another dog-themed memecoin. It was launched in August 2020 on the Ethereum blockchain by the pseudonymous Ryoshi who maintains his clandestine identity. Shiba Inu drives value through community activity and the imagery of the Shiba Inu dog breed. It has also grown into a top crypto asset with a market cap of over $9 Billion at the time of writing.

Pepe (PEPE)

Pepe is a memecoin project that references the breakout character from Matt Furie’s popular comic book – The Boys. Pepe was launched on the Ethereum Blockchain in April 2023 and has a market cap of over $4 Billion

Bonk Inu (BONK)

Bonk is the unofficial canine mascot of the Solana blockchain. It was launched in December 2022 and is branded with the meme of the dog ‘cheems’ getting on the head. The memecoin quickly became a sensation and thanks to the memecoin boom on the Solana network, it has grown to a market cap of $1.8 Billion at the time of writing. It is one the biggest memecoin projects on the Solana network.

Floki Inu (FLOKI)

The Floki memecoin references the dog of tech tycoon and space explorer, Elon Musk. It is a multi-chain memecoin project with additional web3 utilities thanks to the ecosystem the project team has built around the token. It has a market cap of over $1.6 Billion at the time of writing.

Interested in trading memecoins? Here’s how you can start trading memecoin.

Memecoins can be traded on native decentralized and centralized cryptocurrency exchanges. Mainstream trading institutions like Robinhood also offer spot memecoin trading. The best CFD (Contract for Difference) brokers like FPMarkets and AvaTrade also offer CFD contracts for memecoins like DogeCoin.

A few points to consider while choosing an exchange for your memecoin trading include:

Ease of use and customer support: It is important to select a platform with a comprehensive interface and responsive customer support in case you need assistance.

Regional Availability: Ensure that the platform is available in your region.

Listed assets and service: Check the memecoins on the platform to ensure that the memecoin you wish to trade is available on the exchange. Also, check if the exchange offers your type of trading service, for instance, derivatives trading like Perpetual and CFD contracts.

Liquidity and trading activity: To avoid significant slippage, access the liquidity on the exchange. Verify the orderbook spread and other parameters that make your trading smooth.

Security and solvency: Assess the security practices of the platform and how they manage customers’ funds to avoid losing your funds to hacks or insolvency.

Deposit and Withdrawal method: Verify information related to deposit and withdrawal to ensure that terms like fees, minimum and maximum deposit or withdrawal amount suit you

To trade memecoins on a custodial trading platform

Step 1: Create a trading account

Visit the official website of your desired crypto exchange to create a user account.

Step 2: Verify your account

Complete the basic KYC process as stipulated by the platform to enable your account for trading

Step 3: Deposit Fund

For crypto deposits, copy the wallet address of the asset you wish to deposit from your trading account and send your capital to the asset.

If you are depositing fiat, ensure to follow the guidelines for Fiat and on-ramp purchases for the platform

Step 4: Find and trade memecoins

Here are some of the most popular crypto strategies for trading memecoins as applied to:

HODLing

Memecoins are high-risk assets and are usually moved by sentiments and irregular events. If you plan to hold on to your memecoin investment for a while, it is important to make a careful estimate of the community strength and how sustainable the value will be over time.

Narratives

The biggest fundamental for memecoins is their narratives. A key factor to consider is the narrative behind a memecoin and how it applies to you and the price development. Popular memecoin narratives include animal memes, political events, social ideas, and celebrity influence. Certain memecoin narratives come in waves after which tokens under its influence decline in relevance and price. An important point to consider is the strength of the narrative and how sustainable they are. This will go a long way in deciding how long you hold on to the memecoin or if you should invest at all. 

Momentum Trading 

Before investing in a memecoin project, access the market strength and the hype. Utilizing the alternating momentum of a memecoin project could significantly boost your profit. Always attempt to gauge the momentum and enter the trade before the asset picks up. Also, estimate peak momentum levels while taking profits.

Profit-taking

While this is a very personal decision, it is important to align your profit-taking strategy with your risk tolerance and other trading strategies. A popular profit-taking strategy used by memecoin traders is the ‘capital preservation’ strategy. This involves pulling out your initial investment and leaving your profits to run. For instance, if the memecoin doubles in price from your buying price, you can withdraw half of your holdings and preserve your capital.

Staking and Yield Farming

Where this is available, crypto staking with your memecoins or using them in yield farming programs is a good way to boost your portfolio. While this is not common, some memecoin projects have passive income programs, sometimes organized by external projects. You can consider using your holdings for such programs to earn passive income. If the program requires locking your tokens for a long time, ensure that it corresponds with how long you wish to hold the memecoin.

After creating your account and crediting your account, you are now ready to learn how to start crypto trading all types of digital assets, including memecoins. Here is how to place your first memecoin trade:

Placing a Buy Order

To place a buy order.

1. Visit the exchange you wish to purchase the memecoin on.
2. Navigate to the market section and find the memecoin you wish to buy
3. In the Buy section, set the price at which you wish to buy the memecoin.
4. Enter the amount you wish to purchase.
5. Click BUY to execute

Note that if your set price is below the market price, your buy transaction will not be executed immediately but added to the order book.

Monitoring Your Trade

If you used the limit order or set your buy/sell order below/above the market price, you can track your order in the order area to see if it has been filled.

You can also monitor the price development of the memecoin on the exchange or use asset trackers like Coingecko and GeckoTerminal.

Day Trading 

Crypto day trading is a short-term trading strategy. It is a strategy where you buy and sell an asset within 24 hours. Day traders estimate the asset’s performance in the very short term and proceed to make their purchase, then trade it in within 24 hours. Day traders can make multiple buys and sell within the 24-hour time frame.

Swing Trading 

Crypto swing trading is a strategy where traders hold onto the asset for a little longer (say a few days to a week) to make a profit from the market swing within this period.

Here are some practices that the CoinHint team suggest you refrain from while investing in memecoins:

Over-investing

Avoid investing too much capital on memecoins. This is the same for any other financial asset. Set a capital target that aligns with your risk tolerance levels and ensure that you don’t exceed this level significantly. Always invest what you are willing to lose and maintain your set targets.

Trading with Emotions

Avoid trading memecoins based on how you feel. Put aside your emotions, as it is important to adhere to qualitative investment strategies using accurate data. Do not let feelings of confidence, FOMO, greed, and impatience overrun your trading strategies.

Poor Assessment of Security and Fraudulent Parameters

Memecoins are implicated in several cases of rug-pulls and investor exploitation. Look out for signs of these and never underestimate them. If you are trading on decentralized exchanges, ensure that sufficient liquidity is locked. Also, assess the holders’ data to ensure a good distribution.

Trading on Shady Platforms

As explained earlier, verify the authenticity of the platform where you trade memecoins. Ensure that the platform is safe enough. Beware of malicious platforms and platforms with poor security and fund-management practices.

The general perception of memecoins is changing, thanks to several projects in this category that have managed a net positive effect. Cryptocurrency networks acknowledge the relevance of memecoins as an important part of the sector. However, this doesn’t change the basic nature of memecoin projects. The memecoin trading experience is usually unique and challenging regardless of the trader’s experience. This article covers the basics of trading memecoins and some best practices for the everyday trader. It is also recommended that traders do proper research before investing in memecoins. Due to their high volatility, memecoins are best suited for traders with high-risk tolerance levels.

Disclaimer: This article discusses memecoins for educational purposes only. It is not financial advice. Featured projects are not endorsed.