On-Chain Analysis and Trading Strategies

3 Musketeer Setups for On-Chain Trading

Overview of three common setups for on-chain analysis, using Fart coin as the primary example.

Description: Focuses on buying coins after a significant price correction.
Specifics:
- Looks for corrections in the 69% to 80% range.
- Wicks can extend corrections to 85%, but price shouldn't linger there.
- The 70%-80% correction zone is considered the "golden pocket zone" for buying opportunities.
Example: On the Fart coin daily chart, an 89% correction was observed from high to close, excluding wicks. Including wicks, it was a 94% correction.
Significance: Corrections of this magnitude are common in on-chain trading and offer a substantial edge.
Contrasting with Traditional Markets: Ranges and fixed range volume profiles are less effective in on-chain markets due to the dominance of emotions.

On-Chain Dynamics: Heavily influenced by emotions, psychology, and attention dynamics.
Reasons for Sell-offs: Often driven by:
1. Emotional traders taking profits.
2. Psychological burnout.
3. Desire to regain control.
Liquidity Impact: Unlike exchanges, on-chain markets have low liquidity.
- If key players exit, it creates a domino effect, as there aren't enough participants to hold charts.
Conviction Levels: Lower on on-chain coins compared to exchange-listed coins.
- Leads to explosive rallies when liquidity is chased.
Domino Effect: When major holders sell, others follow without considering project fundamentals or news.
Attention Dynamics: Boredom can also trigger sell-offs.
Whale Influence: Top 20% of holders control major transactions.
- Their decisions determine if coins rally or not.
Navigating the Environment: On-chain trading is highly player-versus-player (PVP) with low liquidity.

Impact of Whale Actions: Whales control upside and downside movements.
Absorption of Buys: If whales sell into buying pressure from FOMO-driven buyers, they absorb the buys, preventing significant upward movement.
Delicate Conditions: On-chain coins require many factors to align for significant gains (e.g., 20-60x returns).
Trading Timeframes: Generally shorter (20-40 days) compared to exchange-listed coins, where swing trades can last months.
Flipping Mentality: Most traders aim to quickly flip coins, creating a PVP environment.
Correction Frequency: 80-85% corrections are common and expected due to the emotional and psychological factors at play.

Focus: Identify coins with limited dilution potential.
Approach: Wait for a 70-80% correction, buy the correction, and navigate the trade.
Size Deployment: Deploy larger positions during corrections (e.g., 10-15% of portfolio).
Comparison: More profitable than taking smaller positions early and aiming for larger multiples.

AIXPT: Demonstrated a similar pattern with over 80% correction.
ICM: Traded this coin, buying around 1150 and selling for a 4-5x profit on 4% of the portfolio.
Asset Selection: Success depends on strong asset selection skills and understanding narratives and information cascades.

Indicators: Use 21 and 34 EMAs (Exponential Moving Averages) to identify trends.
Effectiveness: These trends act as significant areas for bids and asks.
Example: On the 12-hour Fart coin chart, a cross and retest at 34 EMA provided a confirmation.
Integration with Other Setups: Combines with swing band, spot band, and perp cloud from exchanges.
Compounding Gains: Each retest of the trend is an opportunity to compound gains.
Trend Loss: If the trend is lost, cut the trade.

Dependence on Volume: VWAP works well because it's volume-dependent.
Usage: Apply anchored VWAP to the chart.
Example: VWAP on Fart coin indicates the next best bid is around $1.
VWAP as Support and Resistance: VWAP can act as resistance and support.
Reclaiming Levels: If VWAP is lost, wait for a reclaim.
Three-Line VWAP: Upper VWAP acts as resistance, lower VWAP as support.
Fart coin: 60 cents is expected to be a strong bounce area (50% correction).

Integration: Use 80% correction rule with trends.
Validation: Buy at 85% correction; If the price closes below this level on the 12-hour chart, it's an invalidation.
Example: Fart coin example:
- Mark the 85% correction level (e.g., 32 cents).
- Wait for the price to trade there.
- Look for trend confirmation.
- Enter on a 50-60% retrace of a strong breakout candle.
- Ensure the 85% level is reclaimed.
AIXPT Example:
- Mark 85% correction level (12.69).
- Wait for reaction at this level.
- Look for trend confirmation.
- Enter on chart candle retrace.
- Monitor if the resistance is cleared or if a deviation occurs.
AV0P Example:
- Use VWAP if trends are lost.
- High VWAP acts as resistance.
- Wait for reclaim if the price goes below VWAP levels.

*Trades and Round Trips are heavily influenced by swings.

Developed this approach when I personally round tripped a lot.
Key Insights:
- Accept that you will be early or late.
- Mentally separate intraday on chain and swing trades by:
  -Creating different balances and transfer easily between those
- Avoid switching what you have

Definition of Duration: The period of time since new information is released.
Definition of Inconsistency: Fluctuations, emotional impulses, or variations in the market.
Explanation: As duration increases and more time passes:
- Pricing in tends to occur more.
- Variations tend to decay.
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