Indicator Overview

The σ Trading Channel is a statistically grounded price envelope designed to identify high-probability reversal zones and trend conditions in an equal-weighted memecoin index. This index compiles the following top 10 memecoins by market capitalization (as of December 2025):

1. Dogecoin (DOGE)

2. Shiba Inu (SHIB)

3. Pepe (PEPE)

4. Official Trump (TRUMP)

5. Bonk (BONK)

6. Pudgy Penguins (PENGU)

7. FLOKI (FLOKI)

8. Fartcoin (FARTCOIN)

9. dogwifhat (WIF)

10. Book of Meme (BOME)

The index price is calculated as the average of these 10 memecoins’ prices (equal weighting, no rebalancing specified here).

It anchors a dynamic mean reversion channel to a baseline moving average of the index price, then expands it using a volatility-adjusted multiple of standard deviation, calculated from the price-to-baseline ratio over a specified historical lookback. This approach adapts to prevailing market regimes by accounting for both directional trend and statistical dispersion in the collective memecoin sector.

Unlike static bands, this indicator uses a forward-thinking ratio-based framework that adjusts in proportion to historical relationships between the index price and its moving average, rather than absolute volatility. The result is a responsive trading channel that can help traders contextualise extremes in memecoin market sentiment, manage risk, and identify potential breakout or mean-reversion setups with greater nuance across this highly volatile asset class.

How To Use

The channel’s white line represents the baseline, with green upper and red lower bounds forming a volatility cloud. Prices touching or exceeding the upper bound suggest overbought conditions in the memecoin index, historically signalling potential pullbacks, ideal for profit-taking or reducing exposure. Prices at or below the lower bound indicate oversold conditions, often preceding rebounds, suitable for accumulation. Traders can enter long positions (or increase exposure to the basket of memecoins) near the lower bound and exit or short near the upper bound. Investors may accumulate positions in these top memecoins during lower-bound touches and reduce exposure near upper-bound peaks, leveraging the channel’s cycle-aware design to navigate the extreme volatility and hype-driven trends of the memecoin sector effectively.