Solana NFT Trading Strategies: Floor Price Analysis and Buying Timing

The basics of NFT trading are buying low and selling high. However, in practice, catching the right timing is difficult. This guide explores basic strategies and analysis methods for Solana NFT trading.

Basic Principles of Trading

There are important basic principles in NFT trading.

The first is risk management. Don’t invest all your funds at once. Use only a portion of total funds and invest only amounts you can afford to lose.

The second is the importance of research. Research the project thoroughly before purchasing. Check the team, community, roadmap, utility, etc.

The third is emotional control. Don’t buy at peaks driven by FOMO (fear of missing out) or sell at lows driven by fear.

The fourth is loss-cutting criteria. Set loss-cutting criteria in advance and execute without emotion when that criteria is reached.

Analyzing Floor Price

Floor Price is the price of the cheapest listed NFT in a collection. Floor price analysis is core to trading.

Check floor price trends. Long-term trends are more important than short-term floor prices. Check if it’s consistently rising, falling, or moving sideways.

Analyze together with trading volume. If floor price rises while trading volume increases, it’s a positive signal. Conversely, floor price rising without volume may be temporary.

Check the number of listings. If listings surge, many holders want to sell, requiring caution. Decreasing listings means holders prefer to hold.

Analyze holder distribution. High concentration of whales (large holders) creates price manipulation risk. Distributed holder structure is more stable.

Determining Buying Timing

Finding good buying timing is difficult, but several indicators can be referenced.

A good point is after floor price stabilizes. If floor price moves sideways at a certain level after sharp decline, support may have formed.

When trading volume starts increasing. If volume starts increasing after long stagnation, it signals returning interest.

Before positive news announcements is an opportunity. If positive news like new partnerships, updates, or airdrops is scheduled, you can buy in advance.

Consider overall market sentiment. When Solana price rises or the entire NFT market recovers, individual projects benefit too.

Determining Selling Timing

Catching selling timing is also important.

Set target profit rates in advance. For example, you could use the strategy of selling half at 2x profit and holding the rest.

Be cautious when price rises with volume surge. Overheated markets can crash rapidly.

Consider selling when positive news is exhausted. Prices often drop after anticipated events end.

Consider partial selling at technical resistance levels. Price may face resistance again at levels where it was blocked in the past.

Split Buying and Split Selling

Rather than taking full positions at once, splitting reduces risk.

Split buying is purchasing in parts at various price levels. If price drops further, you can lower average purchase price, and if it rises immediately, you profit from at least part.

Split selling is the same. Selling in parts each time target prices are reached realizes profits while leaving opportunities for further gains.

For example, with a 3 SOL budget, buy with 1 SOL first, add 1 SOL at 10% decline, and deploy the final 1 SOL at another 10% decline.

Rarity-Based Trading

There are also trading strategies utilizing NFT rarity.

Rare NFTs carry a premium over floor price. Top 1-5% rarity-ranked NFTs sometimes trade at 2-10x floor price.

Find undervalued rare NFTs. If you discover NFTs listed at low prices relative to rarity, it’s a buying opportunity.

Utilize rarity tools. You can check NFT rankings on marketplaces or separate rarity checking sites.

However, high rarity doesn’t always mean expensive. You must also check if it’s a popular trait in the market.

News and Social Media Monitoring

Information is a core element of trading.

Follow official project channels. You can quickly access latest news on Discord and Twitter.

Reference influencer and analyst opinions. However, don’t blindly trust - use only as reference.

Utilize on-chain data. Tracking whale wallet movements, large buys/sells helps predict market direction.

Beware of rumors. Trading on unverified information can lead to losses.

Trading Record Management

Recording and analyzing your own trades is important.

Record purchase price, sale price, fees, profit rate, etc. You can use spreadsheets or trading journal apps.

Analyze successful and failed trades. Identify why they succeeded or failed.

Discover patterns. Identify types of trades you do well and types you’re weak at to improve strategy.

Records are also needed for tax reporting.

Precautions

Trading always carries risks.

The NFT market has very high volatility. Rising or falling over 50% in a day is common.

Liquidity may be insufficient. You might not sell at desired prices and take losses.

Beware of rugpulls or scam projects. Investing in unverified projects can result in total loss.

Trading is a zero-sum game. Someone’s profit is someone’s loss. Recognize you’re competing with professional traders.

In the next guide, we’ll look more closely at methods for analyzing Solana NFT projects.