A token with no cash flow or product whose price is driven entirely by attention, liquidity and reflexive flows.
Meme coins are pure sentiment instruments. There is nothing to value, so there is no anchor to fall back on when attention moves elsewhere, and the distribution of outcomes is extremely skewed: most go to near zero.
The mechanics are where the real risk hides. Check whether liquidity is locked, whether the deployer can mint or blacklist, how concentrated the top wallets are, and whether early buyers are related wallets preparing to exit into retail volume.
This is not a recommendation for or against trading them. If you do, treat position sizing as the entire strategy: assume a total loss is the base case, and note that gas plus price-impact on a thin pool can cost 10% on a round trip before price moves at all.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.
Educational only, not advice. Spotted an error? Post in Site Feedback.