Meme trading on Solana is often seen as a “PvP battlefield,” characterized by fast-paced trading and fierce price swings. However, on the other hand, market reports frequently highlight instances where certain smart-money addresses achieve thousand-fold gains after holding tokens for several days or even weeks.

So, which trading style is more “correct”? Is the winning factor “diamond hands,” high leverage, or other trading traits? In this article, Odaily conducts data backtesting to explore and attempt to uncover the “holy grail” of meme trading.

Overview

Data Source This analysis selected the latest 2,000 transactions of MOODENG and LUCE, filtered by unique wallet addresses. The chosen wallets meet the following criteria: profits over $5,000 or losses over $2,000 (based on the in-depth analytical framework from Meme Trading Handbook: Rebirth of the Diamond Hands (Part 3)). After filtering, 1,084 addresses and 8,858 transactions were included in the final dataset.

*(Note: Initially, the author chose the earliest 2,000 MOODENG transactions and found that these were executed by just 89 addresses, suggesting a potentially “conspiratorial” activity, though this is outside the scope of this article. For better address randomization, the latest 2,000 transactions were used instead.)*

Trading Characteristics Transactions were classified based on the final net result of each token as either profitable or loss-making, with specific metrics calculated for each category.

For profitable trades, metrics include:

• Token holding duration: time between the first purchase and the first sale
• Profitability ratio: total profit of the token divided by total initial cost
• Number of purchases: how many purchases were made before the first sale

For loss-making trades, metrics include:

• Token holding duration and number of purchases (same as above)
• Stop-loss ratio: total loss of the token divided by total initial cost

Here, the holding duration reflects the “diamond hands” factor, the profitability and stop-loss ratios indicate the preferred risk-to-reward profile of the addresses, and the number of purchases distinguishes between one-time entry traders and those who average down costs through multiple buys.

Diamond Hands or High Leverage? What is the Key to Success?

For readers more interested in the findings than the methodology, here is the conclusion: Addresses with high profits distinctly differ from others in two key aspects—holding duration for profitable trades and stop-loss ratio for losing trades. These addresses exhibit significantly higher patience in holding profitable positions and employ broader stop-loss conditions than average, suggesting that success in meme trading may hinge on these factors.

Let Profits Run, Cut Losses Short

Jesse Livermore once famously said, “After years of playing the markets, making and losing millions, I want to tell you this: It was never my thinking that made the big money. It was always my sitting.” The top addresses analyzed in this study showed a clear differentiation from others: their holding duration far exceeded the norm, with a notable positive correlation. On average, these addresses held tokens for 6–8 days, which aligns closely with the time required for major tokens on Solana to gain momentum.

However, it’s interesting to note that “overall loss-making addresses” had similar holding durations to those with profits exceeding $500,000. After further examination, it was found that these loss-making addresses engaged with 817 profitable tokens. Though it’s challenging to backtest each token’s price movement, the data suggests that the profit discrepancy arose from profitability ratios—essentially, these addresses chose the wrong tokens to hold.

Another factor with a clear positive correlation was the stop-loss ratio. As profits increased, stop-loss thresholds also widened, though differences across ranges were relatively subtle.

Factors Found to Be Unrelated to Profitability

Surprisingly, profitability ratio had no direct impact on an address’s ability to profit, with a Pearson correlation coefficient of only 0.04, indicating an almost non-existent linear relationship. In this case, without a consistent profitability ratio, an address’s total profitability depends on win rate. This suggests that selecting the right tokens and holding them for longer durations is the root of profitability differences among addresses.

Another factor shown to be unrelated to profitability was number of purchases. Whether an address opted for a single-entry trade or multiple purchases to average down cost, both strategies could potentially work. This aspect was previously discussed in Meme Trading Handbook: Rebirth of the Diamond Hands (Part 3), where it was suggested that copy trading should avoid multi-purchase strategies, a recommendation reinforced through weekly testing.

As a result, purchase frequency can generally be ignored when evaluating the profitability potential of an address, but it should be a key factor when assessing whether an address is suitable for copy trading.

Summary

This article provides a broader analysis of key success factors in Solana meme trading, building on the findings from A Thousand Solana “Smart Wallets”: Who’s Making the Big Profits, and What Can We Learn? The conclusions here are even more defined—“diamond hands” are essential for top-tier profits. However, for readers with limited capital, directly mirroring this strategy may be challenging, and it is recommended to adjust trading tactics based on individual circumstances.

Disclaimer

1. This article is reprinted from [Odaily]. The copyright belongs to the original author [Nanzhi @ Assassin_Malvo]. If there are any objections to this reprint, please contact the Gate Learn team, and the team will process it promptly following the relevant procedures.
2. Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.