March 13, 2024

Degen Trading with AI

This is the final article in a four-blog series about trading strategies that you can leverage with the Scopechat AI-powered crypto trading assistant.

For the first three parts, read the following articles:

Signal Trading with AI | Trend Trading with AI | Copy Trading with AI

Degen trading is one of the newer strategies that emerged thanks to crypto. This strategy, which involves constant engagement in high-risk speculative trades and targeting exceptionally high returns in a short time, is typically reserved for crypto trading veterans who know their way around decentralized exchanges (DEXs).

The term "degen" started as a self-deprecating gambling reference and morphed into a crypto-specific strategy involving high-risk, high-reward moves. Given the high level of volatility in many parts of the crypto market, degen trading has come up as an attractive strategy for crypto veterans.

In this article, we will discuss how you can execute degen trading with the help of crypto + AI technology. We will also understand the advantages, risks, and important factors to look into for copy trading.

Pros and Cons of Degen Trading

Unlike the other trading strategies highlighted in Scopechat, degen trading is suitable for a specific niche of trader: short-term crypto traders with extensive on-chain operation experience and adequate proficiency in on-chain data analysis.

The advantage of degen trading lies in quick decisions and a keen eye for spotting tokens that currently trend downward but also show high rebound potential.

However, as with any trading strategy, there are some risks involved with degen trading. Here are a few things to keep in mind:

- The tokens involved in the trades may experience extreme volatility, potentially leading to a total loss of funds.

- Traders might be influenced by market sentiment, resulting in impulsive decision-making and excessive trading.

AI-Powered Degen Trading: Dashboards to Watch

Your awareness of the advantages and drawbacks of using degen trading will inform your decisions by the time you start looking for crypto tokens to trade. Searching for the next hot tokens is usually time-consuming, but thanks to AI advancements, there are Web3 solutions like the Scopechat crypto trading assistant, which can streamline this process for traders.

Under Scopechat's Degen Trading strategy dashboard, there are three recommended lists to check for your next crypto discovery:

1. Trending on DEXes

This leaderboard shows the most active tokens on DEXes in the past 24 hours. Much of degen trading happens on DEXes, hence trading volumes on these exchanges are often indicators of the general interest on certain tokens among degen traders.

2. Smart Money Top Buys

This leaderboard displays the daily ranking of tokens bought by Smart Money addresses. Smart Money refers to individual addresses that have demonstrated outstanding performance in the past month, considering metrics such as profit amount, ROI, and win rate. Trading activity from high-performing investors can be a good indicator of bullish sentiment on crypto tokens.

3. Smart Money Top Sells

This leaderboard is similar to Smart Money Top Buys, but this time it's for digital assets that most Smart Money investors are selling in crypto markets.

AI-Powered Degen Trading: Filters to Use

To further refine your alpha hunting quest as a degen trader, the dashboards on Scopechat feature various filters that you can use to zero in on the types of tokens that you prefer.

We recommend the use of the following filters for degen traders who are viewing the Trending on DEXes leaderboard.

1. Holders

The number of holders reflects the popularity of a token. A small number of holders indicates that the token is not widely known yet and is still in the early stages, where price fluctuations may be intense. Therefore, you can choose an appropriate range for the number of holders.

2. Whale Ratio

This ratio is calculated by dividing the total token holdings of all large holder addresses by the token's total supply. Typically, when this ratio exceeds 30%, it indicates that the token is relatively controlled by large whale holders. If this ratio is below 10%, it may suggest a more diversified distribution among holders.

You can use this indicator to see if the token is controlled by large whale holders.

3. 7D Whale Position Change

By examining the ratio of large holders increasing and decreasing their holdings in the past 7 days, you can assess whether the token is still worth holding. If large holders are actively reducing their holdings while the token price is consolidating, it may indicate that large holders are selling to retail investors.

4. 7D Smart Money Sell Ratio

Check how much Smart Money has sold out a certain token after buying it in the last 7 days. Generally, the lower this percentage, the better, as it may indicate that Smart Money still has confidence in the token.

Meanwhile, for degen traders viewing the Smart Money Top Buys/Sells dashboards, the following filters are recommended.

1. Market Cap

Because Smart Money often invests in high-risk low-cap tokens, you can set a lower limit for the market cap that tokens need to reach to filter out medium to large-cap tokens with relatively stable fluctuations.

2. 24h Volume

Trading volume can roughly indicate the popularity of a token. If you are looking for early opportunities, you can choose tokens with relatively small trading volumes, but please be aware of the associated higher risks.

Watchlist and Alerts: Advanced Portfolio Tracking

Aside from dashboards, leaderboards, and filters, Scopechat also has a game-changing Watchlist and Alerts feature that lets you monitor your favorite crypto tokens & their market actions.

Scopechat provides many signals you can base your trades on, such as:

  • Price Change
  • Centralized Exchange Data (Deposit & Withdraw)
  • VC/Whale Position Changes
  • Smart Money Buy/Sell
  • Volume Change - Spot/Perpetual
  • Funding Rate/Open Interest Data

You can also set up and receive real-time alerts on these tokens, straight to your Discord or Telegram.

(Note: The Watchlist and Alerts feature is exclusive to Scopechat Pro users. Subscribe to Scopechat Pro to gain access to this feature.)

For more information about degen trading and other trading strategies made easier by Scopechat, check out the Scopechat Trading Dashboards guide.

Visit 0xScope

0xScope | Scopescan | Link3 | X | Telegram | Youtube | Discord