Base-150 Strategy: The Easiest Way to Define the Trend and Enter the Forex Market
The Base-150 strategy is a systematic trading approach designed to maximize returns by using a consistent risk-to-reward ratio across trades. In this article, we’ll cover the basics of the Base-150 strategy and provide examples of how to use it in trading.
What is the Base-150 Strategy?
The Base-150 trend-trading strategy is a technical analysis method used by traders to identify and capitalize on market trends. It is named “Base-150” because the original version of the strategy relied solely on a single 150-period exponential moving average (EMA) to guide trading decisions.
Over time, the strategy was enhanced by incorporating additional EMAs. This strategy is particularly popular among traders who seek to follow the trend and make trading decisions based on the alignment of multiple Moving Averages over different time periods.
What can you trade with Base-150?
- Currencies (Forex), particularly major currency pairs, like EURUSD, GBPUSD, and USDJPY, commonly traded using trend-following strategies due to their high liquidity;
- Individual stocks, in particular those with a strong trending behavior such as Tesla (TSLA), Apple (AAPL), and Amazon (AMZN);
- Commodities like gold (XAUUSD), crude oil (WTI), and silver (XAGUSD) as they often exhibit clear trending patterns.
What timeframes suit the Base-150 strategy the best?
The Base-150 strategy is typically employed on medium to longer-term timeframes to capture significant price movements. The most common time frames for this strategy are Daily (D1), the 4-Hour (H4), and the 1-Hour (H1).
Which indicators are used in Base-150?
The Base-150 strategy utilizes a combination of four Exponential Moving Averages to assess market conditions and pinpoint trading opportunities: the 365, 150, 26, and 6-period EMA.
To add the indicators in MetaTrader, open your terminal and click the Insert button in the upper left corner of the screen. Select Indicators, then Trend, and Moving Average.
After opening the Parameters tab, change the settings of each indicator in the Period field. Lastly, change the color of each separate EMA to the one you like.
How to use the Base-150 strategy
The Base-150 strategy relies on three steps: trend identification, trend confirmation, and entry-signals confirmation.
- Trend identification
When the price is above both the 365-period EMA and the 150-period EMA, the trend is bullish. When it is below them, the trend is bearish.
- Trend confirmation
When the 150-period EMA crosses the 365-period EMA from the bottom up, the trend is confirmed bullish. When the crossover happens top-down, the trend is confirmed bearish.
You should look for long trades only in a bullish trend and short trades only in a bearish trend.
- Entry-signals confirmation
BUY SIGNAL
If you are looking for long trades only, the confirmation comes when:
- The price crosses bottom-up the 26-EMA, and
- shortly, the 6-EMA crosses the 26-EMA in the same direction as the price.
SELL SIGNAL
If you are looking for short trades only, confirmation comes when:
- The price crosses top-down the 26-EMA, and
- shortly, the 6-EMA crosses the 26-EMA in the same direction as the price.
To time your entries perfectly, you can also use minor timeframes: the H1, when a trading signal appears on the H4, or the H4 when the signal appears on the D1.
STOP-LOSS AND TAKE-PROFIT
The Stop-Loss should be placed above the 365-EMA for the sell trade and below the 365-EMA for the buy trade. Better if the Stop-Loss is placed above the recent swing high/swing low.
The Take-Profit can be placed depending on your trading strategy: it could be positioned based on risk-reward, support and resistance, or other methods.
Base-150 strategy: Conclusion
The Base-150 strategy is perfect for Forex trading because it excels in capturing trends in highly liquid markets, like currency pairs, which often display strong and sustained movements. With its focus on identifying clear entry and exit points using multiple EMAs, this strategy allows traders to effectively navigate the fast-paced Forex market.
Start trading with Headway today and experience the power of the Base-150 strategy!
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