Narrative trading, also known as story trading, is an investment and trading strategy that involves capturing market hot topics and trends. This strategy requires investors to have keen market insights and the ability to timely grasp market dynamics in order to gain a competitive edge. In this article, we will share how to develop a narrative trading strategy and provide some tips to maximize profits.
I. Basic Strategies for Narrative Trading
The basic strategies for narrative trading are relatively simple, but to truly profit from it, a deep understanding and flexible application are required. The following are commonly used steps in narrative trading:
1. Identify upcoming significant cryptocurrency catalysts: For example, the NVIDIA AI conference in March this year was a good catalyst. Prior to the event, AI tokens performed well because the market speculated that significant AI news would be announced during the conference.
2. Identify cryptocurrencies related to and benefiting from the catalyst: For example, the team of Near Protocol also participated in this event. If you bought NEAR or other popular AI tokens a few weeks before the conference, you would have received substantial returns.
3. Invest in these cryptocurrencies: Utilize cryptocurrency calendars to find upcoming catalysts that may positively impact the prices of certain tokens.
4. Sell when everyone starts talking about them: Profiting when market sentiment reaches its peak is the best strategy. At this point, most investors in the market will rush in, driving the prices further up, and you can sell at a high point to make a profit.
II. Three Waves of Hype in Narrative Trading
Most major narratives go through three stages:
1. Early positioning by smart money: Smart money starts buying tokens related to the potential upcoming narrative and subtly shares bullish points on social media.
2. Mid-term dissemination: More investors start paying attention to and discussing the narrative, and market sentiment begins to heat up, leading to price increases.
3. Mass discussion and selling at the peak: When everyone starts talking about the narrative, the prices of tokens related to it skyrocket, making it the best time to cash out.
III. Leveraging Tools and Data for an Advantage
1. Build a social network
Building a strong network of traders is crucial. Use social media platforms to connect with other narrative traders and establish relationships with them to gain more market information and trading opportunities.
2. Monitor smart money wallets
Use tools like Nansen or Arkham to track the wallets of the most profitable on-chain traders and investors. These tools can help you discover the movements of smart money in the market and position yourself ahead of time.
3. Utilize 3EX AI Trading for trend analysis
Utilize on-chain analysis platforms to discover emerging trends in DeFi. For example, focus on DeFi projects that have experienced the fastest growth in the past 30 days. If you find multiple top protocols in a specific cryptocurrency sector, such as RWA, rapidly growing, it could be a signal of a new narrative forming.
IV. Profit Strategies in Narrative Trading
Different types of narratives require different exit strategies:
1. Narratives triggered by major unexpected news: These narratives typically last for several weeks, and the best strategy is to gradually profit during the upward movement instead of selling all at once.
2. Narratives triggered by upcoming catalysts: The prices of tokens in these narratives usually reach a local peak a few days before the catalyst date, so it is advisable to take substantial profits a few days before the catalyst, or even close the entire position.
3. Narratives triggered by secondary market speculation: These narratives may last longer in a bull market, but caution should still be exercised due to periodic price fluctuations.
V. Mindset and Strategies in Practical Operations
Successful trading relies not only on technical analysis and market judgment but also on psychology. Maintaining a calm and rational mindset, avoiding emotional trading, is key to long-term success.
1. Start with small amounts: When starting narrative trading, it is recommended to trade with small capital and gradually accumulate experience.
2. Continuous learning and adjustment: Regularly review and summarize trading experiences, identify the reasons for success and failure, and continuously optimize trading strategies.
3. Caution in increasing bets: Only consider increasing investment scale after consistently making profits over a long period.
VI. Unlocking Profit in Narrative Trading with 3EX AI Trading Platform
To help more investors profit from narrative trading, the 3EX AI trading platform has introduced a series of innovative features:
1. Personalized custom strategies: Users can customize strategies based on their investment needs and market conditions using the rich strategy library provided by the 3EX platform, enabling more precise trading.
2. Multi-indicator filtering strategies: 3EX provides various filtering indicators to help users select the highest-quality trading strategies, reducing risks and increasing returns.
3. One-click copy trading: Through the copy trading feature of the 3EX AI trading platform, users can easily follow the strategies of top traders without the need for complex market analysis.
4. Bankruptcy protection: To reduce users’ trading risks, 3EX has introduced AI trading copy bankruptcy protection. Users can receive up to 50 USDT insurance when they experience their first bankruptcy, providing additional security for trading.
The 3EX AI trading platform not only provides robust technical support, but also integrates ChatGPT-4o and customizes model optimization, providing users worldwide with a secure, efficient, convenient, and intelligent digital asset trading experience. Join 3EX, experience the charm of AI trading, and embark on a new era of intelligent investment!
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