Small/Mid Cap Trading Series Part I, It is Time!

This article is an entry into the world of high-risk, high-reward crypto swing trading. Nothing in this article is financial advice, just some strategies and theories that have paid off for us tremendously. I encourage subscribers to read some of our other intro articles first, and to focus on larger market cap projects initially.

Who Should be Trading Micro/Mid Caps?

While this question is straightforward, we generally do not recommend jumping directly into smaller market capitalization projects. The reasoning for this is while they do provide the largest gains, they also carry the highest risks. Lots can go wrong, projects can suddenly dump 50-90%, exploits, rug pulls, and scams are possible. Very few of these projects can be found on Coinbase or Binance US. This series is for the advanced crypto enthusiast that wishes to widen their reward margin while minimizing risk by picking fundamentally strong projects.

To start, we usually recommend newer crypto investors to invest into a top 5 list, this usually includes Bitcoin and or Ethereum as the main risk hedge. Once you have made some profit in these picks, be it AVAX, LUNA, MATIC or others, trade up into Ethereum, or sideways into a stable coin that cannot drop in value. Ethereum is great since it is a very common trading pair token. Strategies are deeply personal; you might choose to take half of your profit into Ethereum which is your long-term investment thesis. The other half into stable coins for alt coin purchasing. The key is that you will need money ready on a decentralized crypto wallet preferably, our most used wallet is [Metamask]. This Ethereum based wallet can also function on Ethereum compatible blockchains such as Binance Smart Chain, Avalanche, Harmony, Polygon and others. 

-Above is a Micro Cap MELT on Avalanche we bought at 15-30 cents, up over 1000% in a less than a month!

Write your Strategy Down and Stick to it

It might seem like a joke, but I always recommend you at least write down some numbers for your strategy. Say you have amassed 20,000$ on your Layer 1 picks and you have done some research, you are ready to invest into your first smaller project. You will need to decide how aggressively you will want to take profit. Remember, do not marry yourself to any one project, do not get sentimental or emotional, stick to your strategy, this is how you build success.

Here is an example: You decide to sell 50% of your positions in layer 1 projects and now have 10k in stable coins. Do not invest this 10k into any one project. You do need to decide what risk your 10k will be exposed to. A great start is to look into lower market cap layer 1 projects and pick one or two. These will be considered your safer bet picks, you choose FTM, and ROSE as your two picks. You invest 1k per week into each of these tokens on their respective dips. Within 3 weeks you have 3k into each, this is 6k of your stable coin funds. I personally consider FTM to be a “large cap” and ROSE to be a “mid-cap/large-cap”, but these are just terms people throw around. Generally, once a project breaks through the 1 billion dollar market- cap and holds it is a “large cap” to me.

Now you have some exposure to different ecosystems, and you have 4k left to buy dips on smaller projects. There are many ways you can go about this, one way to reduce risk would be to pick 4 more projects and put 1,000$ into each. This is where your small/mid-cap watch list comes in. If you have read some of our other articles you will have seen watch lists we create. These lists are tremendously important because you can really follow the trend of a token you are interested in, look for the potential bottom. Once the bottom appears to be in, you can dollar-cost average into your picks. You analyze the picks and decide there is MUCH more upside potential than downside, the tokens have been in a range, nearly flat and boring, forgotten about.

How do you know which Tokens to pick?

This is the hard part, but a general strategy of the “strong remain strong” can be applied. Looking months into the past, I have 30-40 alt coins on watch lists that have taken a beating from the Bitcoin dip, these tokens have strong recoveries when Bitcoin goes on an uptrend, we have seen it time and time again. Another strategy would be to see what tokens the general public and crypto personalities you trust are talking about, make sure their initial pump launch phase is completed, then average in. I never buy new tokens right on launch, bots pump and dump them, and some have no unlock period and the seed round investors dump on the market. I have a “portfolio” of crypto personalities, companies, and enthusiasts that I follow on Twitter. If I see several of my trusted comrades mentioning a project, I do my due diligence and look it up, you cannot underestimate the power of hype and community during a bull-market.

Back to Strategy

No strategy is complete without an exit strategy. Entering is easy, you average in, assuming you are using a low fee network or exchange. You do not buy all at once, this generally gives you a more favorable cost basis (average buy price). Exiting is the hard part, there is always sellers regret, when you sell right before a massive uptrend. I like to base my profit taking on market-cap, how risky a token is, how much I like the token on sell days, and upcoming developments. I will preach, do NOT regret taking profit, EVER! Lock in your gains at set intervals, stick to your strategy, and it is OK to change your thesis. If you find yourself up 5x on a pick and you have some others you really want to get into, do not hesitate to sell your bags, these tokens can drop just as fast as they rise.

>>Below is my entry and exit strategy for PYR (Vulcan Forge)<<

-We know that PYR topped off at ~50$, so my first profit take is going to be 45$. I like to pick levels below psychological levels (round numbers, numbers ending with zero or five), 45$ is not the best example since it ends in a five, 43 or 44 would be best.

-I try to buy PYR any time it drops below 15$, this is a solid 3x potential on the BTC uptrend.

-Say you invested 1,000$ into PYR and your average buy in price is 15$, you sell 33% at 45$ and make 990$! You covered your initial investment with only 33% of your initially purchased tokens.

-From here, the rest is all profit, since we are in price discovery, I want to take profit at 71$ selling another 33%, this is a 5x (1562$) the market cap would be around 1.7 billion, this is possible since PYR is a similar pick to GALA. I sell 33% at 71$ and keep what we call a moon bag.

-What you do with your moon bag is your choice, say PYR makes it to 150$ you sell your final 22 tokens, that’s another 3300$. This would equate to 5,822$ from your 1,000$ bet, almost 5000$ profit. This profit can then be dispersed back into Ethereum, stable-coins, or the layer 1 projects you initially took profit from. You have essentially gained more large-cap tokens with the same initial dollar-amount with this strategy, this is the goal.

Final Words

We are going to continue this trading series, to show our readers how we trade these tokens on BTC reversals. Do remember that BTC and Ethereum are king, they still lead the market, some tokens will pump alongside them, some will not. The safest bet is to realize a BTC trend reversal, then jump into your picks on their lows, watch tokens for weeks or months. We have discussed a variety of tokens on our site that we are eying and or buying. We encourage doing your OWN research, we aim to teach our users to fish. As always stay safe out there, we look forward to the coming weeks!

Patrick O’Neil

About Patrick O’Neil


Patrick is an avid technology and gaming enthusiast. Patrick taught himself how to assemble computers in 2010 and was always fascinated with the gaming market. In 2019 he decided to sell his grayscale Ethereum funds and dive into the world of crypto firsthand. 

Learn More