Being successful in LP means understanding WHEN to enter into a position. Is there opportunity and what strategy to use for the situation?
We all have seen it a million times, a token launches, has a quick run up and often followed by a big dump before it does whatever it's going to do. Usually there's a least a bit of a bounce on the way down. This is what I'm going to talk about, not whatever the token does after this.
This is detailed, but it's really not complicated.
This big dump is a liquidity provider opportunity. We go in, one sided with SOL. I like to use a mix of spot and bid ask, but a pure bid ask can work, or even a flat spot, if you get the right bounce. I put in more spot than bid ask sometimes. Whatever you like. But we go wide. As wide as you can. Assume this thing is going to zero!
Let it rug. Down down it goes, we are collecting delicious fees along the way. You gotta watch it though. When that dump slows and starts to turn back up with the bounce, this is your chance. What you do here is up to you. I like to claim my fees and throw just the token in to the position, using bid ask.
If you started with bid ask, you may want to flip it by withdrawing, but not close the position. Deposit that token back in using bid ask, spot + bid ask or just spot. Whatever you feel is best.
Watch the bounce. Sometimes it goes back up a bit, drops slightly, comes back up a bit more and then continues the way down. Sometimes you only get one bounce. Not always, but I work off this assumption to minimize my risk. Maybe it moons from here. Maybe it runs to zero. I like to secure profit here, whatever it is. I don't care what the percentage is. If I'm in green, bullish, let's take it. I'm looking for a sign that the bounce is done, often by watching the 15 second chart.
I don't get greedy, I don't know what's happening next. Close, sell whatever token is left, make your PnL card and take a flex pic at the gym, because you can. Or whatever.
Could the token run back up to your entry point? Maybe. Is that ideal for max profit? Absolutely! But it also might just rug. Do you really know? If you do, act accordingly.
That's why I take the profit here and be happy. Because I don't know.
If it runs up and becomes a solid runner, great. Reevaluate the chart and the right strategy to apply in the situation. Or move on to the next.
Only possible on @MeteoraAG
BULLISH
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Writer: Mhedi
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