Let’s set the scene. It’s late and you’re doomscrolling on X and see that@aixbt_agent""> @aixbt_agent just deployed $CHAOS. You ape $1000 at 1M mcap. Moments later shoots up to a 10 million mcap and you want to lock in some profits. If you’re an asshole you FSH the chart in one clip, get burned by slippage and will likely not learn anything from this article. Say you’re not an asshole and want to lock in some profits, I’d like to present a couple of approaches to planning your exit.

The majority of traders will plan their exit and start selling small clips as they hit desired profit milestones (ie. 2x, 10x etc..) while leaving a small percentage (~10%) incase the coin continues to moon. This is the strategy that I primarily use, especially when I am uncertain of the outcome. It allows me to take profit (TP) while retaining limited exposure in either direction.

Recently, I has started using concentrated liquidity (CL) pools to maximize earnings while exiting positions. There are situations that are more appropriate for this strategy that will be coveredin this articles as well as some downsides to this approach.

Taking Profits using CL

LPing memecoins is the best part about memecoins

As I mentioned above that there are situations that are more appropriate to using CL for taking profits. Ideally you want a coin that has:

• High Volume
• Low Liquidity
• High Mindshare (think $AIXBT, $Zerebro, $MOG, $BITCOIN)
• High Conviction
• Trading on a low fee chain (ie. Base, Solana)
• Won’t go to zero in a short timeframe

These characteristics should allow you to earn decent yield while exiting your position.

Next you’ll want to decide what token you want to pair it with and the fee structure. Personally when LPing a coin I like to pair it with the chain’s gas token.

Pro Tip: If you’re LPing a recently bonded AI agent from@virtuals_io""> @virtuals_io, it pays to pair it early w/ ETH. When these token bond, the token is paired with the virtuals token (not eth) and usually have little to no liquidity in the ETH pair early on. If your early and have size you can maximize fees earned.

For the fee structure you’ll want to use 1% due to the volatile nature of memecoins. Any less and the fees you earn may not offset impermanent loss (IL).

Finally its time to set up the trading range of our LP. To understand how to use CL, it is important to know how the LP will behave with your price bounds. The lower bound of the range is typically the price at which your 100% of your LP will be in the memecoin and the upper bound of the LP is typically the price at which 100% of your LP will be in ETH/SOL.

Lower Bound - I typically choose a range a few ticks above market price that way I don’t need additional ETH/SOL and can supply single sided liquidity.

Upper Bound - I like to set the upper bound as my “stretch goal” for profit. This is usually a realistic goal thats achievable but wont be disappointed if I exit sooner than this price range.

Using these guiding principles, my desired profit range will reside in the fee earning range of my LP. If the price drops below my lower bound, ill stop earning fees until the price climbs above it again. The same if true if the price surpasses the upper bound.

⚠️Please familiarize yourself with CL and get comfortable with setting ranges as it is easy to get mixed up and wrecked especially if you’re initializing the pool❗️

Lets Review the benefits/risks of LPing Memecoins

Pros:

• Works well with coins that you don’t mind holding (ie have strong conviction) have good volume, strong mindshare
• Earn gigantic APRs
• Highly customizable
• Can exit positions without price impact (no slippage once the price hits your upper bound)

Cons

• Requires active management, can fail to lock in profits if you don’t remove liquidity at your targets
• Can incur IL if yield
• Not recommended for beginners

Revisiting our $CHAOS example from the beginning.

You aped $1000 into $CHAOS at $0.00001 (1M market cap) and received 100,000,000 tokens. We believe $CHAOS will have a lot of volume, AI coins have crazy mindshare right now and we have high conviction in it as it is the first token deployed by, thus making it a great candidate to LP. After a few moments the coin is already at $0.0001 (10M market cap).

We want to set our lower bound at $0.000105 which is slightly above the current market price and we think this coin can eventually reach a market cap of 30M or a price of $0.0003. We would also be happy in profit anywhere in between. So we set our upper bound at $0.0003.

Best case scenario is that we range between 10M and 30M for a while with plenty of volume such that we eat on the fees. If the market price moves up and consolidates around 20-25M you can remove liquidity and re-add with a narrower range and lower bound closer to the 20M mark.

Note: this is an over simplification. In reality you’ll need to convert price in dollars to price in ETH or whatever token you are pairing $chaos with.

There are obviously many variations and more sophisticated ways to earn yield on your memecoins by dividing your bag into multiple tranches and using narrower ranges. To each their own based on each persons goals or risk tolerance. I think its important for each trader to figure out what works for them. I hope you enjoyed reading this and would appreciate any comments below!

I’ll leave you with a video that was released by @phtevenstrong while I was writing this article. Funny coincidence that we both used $chaos as an example 🤣

Cheers!

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