The Bladerunner trade

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If you know what you are doing in the forex space, making the Bladerunner trade will be simple enough.  In fact, I may go out on a limb and say this could be the easiest method that I will be sharing with you.

Some traders may not like it for this reason but that does not take away from how effective it is. Especially for beginners looking for forex strategies, it’s a good method to learn.

The strategy is fully based on price action to identify the patterns in the market and then bask in the rewards at the end.

But before we get started, a bit of background information is required to get you up to speed…

An introduction

The Bladerunner trade is a forex price action strategy that uses pure price action.  It requires the use of candlesticks, pivot points, support and resistance to trade with.

 

This price action strategy primarily relies using 20-period exponential moving average (EMA) or the middle line of the 20-period Bollinger bands, but there is no real preference as to which method proves the best results.

There is no need to use any other off-chart indicators to use this method effectively but if you feel like you need some extra vindication, by all means, go for it.  It’s not uncommon for traders to use Fibonacci levels when using the Bladerunner strategy.

What separates this trading method from other price action strategies is that it does not require a trader to use it within a specific time frame.  It can also be used to trade on any currency pair on the market.

It does need to be said however, even though it’s not strictly time dependent, it works better when the Asian markets are open.  For me in the UK, this means to bet the best results, I will be staying up through the night o trade as the markets open at 10pm and close at 9am.  For you US traders, the Asian markets will open at 6pm EST.

The Bladerunner trading method is a day trading method but works best as soon as the market opens so if you do decide to start using this method, get trading as soon as you can.

We suggest using the Asian market as opposed the UK because when London opens, the markets can change suddenly at the start of every day which can throw off accurate predictions.

Bear in mind though, this is only a suggestion.  The trade method can work during any time the markets are open, it just works that much better at the Asian ‘rush hour’.  If you come across a period where you find the most success, stick to it.

This flexibility is what makes the method so popular.

Ok so now we have that out of the way, let’s get into the method.

The Bladerunner Trade

You’re still wondering where this strategy gets its name from.  It is because the 20-period EMA divides the price on a knife edge.  For those of you familiar with the original film, you will understand.

A Bladerunner trader will be comparing the actual price action to what their chart is telling them it should be and using this information to make changes to their trades.

If the price action is above the EMA, it becomes more likely that it will decrease sooner rather than later.  Similarly, if the price action is below the EMA, it becomes more likely that it will increase in the near future.

A tip we should mention before going any further:

When making a Bladerunner trade, make sure the price is trending.  Once you are comfortable this is the correct state, check the EMA once over before entering the trade.    Take careful consideration is what I am trying to get at.

If you don’t do these things, it is likely you are just gambling and likely to lose money.  There is a reason why forex is different to gambling so don’t fall into this trap.

Now that’s out of the way, let’s back to it.

Retesting

If the price action is above the EMA, wait for it to fall and reach the EMA.  It should hit it and then shoot straight back up.  Likewise, if the price action is below the EMA, wait for it to rise and touch the EMA.  It should reach it and then drop straight back down.

The approaching candle must close on the same side as the EMA.  This candle is known as the signal candle. If it does not, it’s not time to enter the trade so just wait until the right moment.

If the next candle moves away from the EMA, you have a confirmatory candle.

This is successful retesting.

Without any further detail needed, this is the simple way of Bladerunner trading.

If you would prefer to be extra safe, wait for the whole cycle to repeat itself.  If you find a signal candle and the corresponding confirmatory candle using the above, you can be confident in the trend.

Is this too good to be true?

I know what you mean.  This trade method seems way too simple to be profitable but it really does provide good results.

You are using price actions to make accurate predictions and it basically relies on the knowledge of fundamental forex trading.  If you have this, you can’t really go wrong.

How many of you are ever going to trade against the EMA?  Unless you have some inside information that will prove otherwise, I will wager not many of you.  It wouldn’t be the logical strategy.

The secret to its success isn’t too hard to work out; only trade when the market conditions are favourable.  Patience is key so wait for the right time and you will reap the rewards.

Entering a trade

A few point to note before entering a trade.

Firstly, there should be more than two indicators noticeable that will recognise the same price level where price actions are likely to react.

Also, as with any trade, any sudden announcements, be that through a news outlet or updates through social media, can cause volatile movements on forex prices.  Just keep an eye and ear out on current affairs so you have all the information you need to make a successful trade.

I have been trading for quite a while now and have noticed how quickly prices can change shortly after a news headline.  Just wait for about half an hour or so to let the markets calm down before looking for patterns and entering trades.

And finally, again, you will be trading in current trend directions with a successful 20-period EMA restest.

So with that being said, here is a step by step guide to a short and long Bladerunner trade.

For a short entry

  1. Place stop orders 2 pips below the confirmatory candlestick.  Your orders should be expiring at the start of a new candle.
  2. Place a stop loss 2 pips above the signal candle.
  3. Set your first profit point to be equal to the risk in pips.
  4. Set your second profit point to be double the risk in pips.

For a long entry

  1. Place stop orders 2 pips above the confirmatory candlestick.  Your orders should be expiring at the start of a new candle.
  2. Place a stop loss 2 pips below the signal candle.
  3. Set your first profit point to be equal to the risk in pips.
  4. Set your second profit point to be double the risk in pips.

Once the price action has moved in your predicted direction and hits your first profit point, close the order.  Move the stop loss to cover a break even trade.  You should then leave the trade until the market closes.  You will either profit or, at worse case scenario, break even.

By keeping your profit targets at these realistic levels, making profits will be achievable.

Example

So now we have a lot of theory based knowledge under our belts, let’s put it to use in a couple of examples.  I found some interesting graphs over at Traders Laboratory which show the Bladerunner strategy in full effect.

Starting with a bullish trend on the daily EUR/USD chart:

As you can see, there are multiple tests on the 20-period EMA.  There were 5 notable bearish movements that failed to break throught he 20-period EMA.  This increases the likelihood that eventually the prices will reject to the topside once the price actions consolidate.

If the price actions are then predicted to increase once the averages have corrected, it is possible to take a long position on the trade.

Let’s now look at a bearish trend on the daily USD/JPY chart:

Here, the example is a lot more volatile than the previous bullish but the patterns can be seen just as easily.

As shown, there are 4 instances of a bullish trend failing to break the 20-period EMA before stalling.  This increases the likelihood that eventually the prices will reject to the downside once the price actions consolidate.

If the price actions are then predicted to decrease one the averages have corrected, it is possible to take a short position on the trade.

As you can see, these examples aren’t too difficult to understand.

Each example showed clear signs of the prices actions attempting to breach the 20-period EMA, stabling out and from there, predictions can be made accurately for a tidy profit.

Using the polarity indicator to trade

The method is very similar to using Bollinger mid-bands or the 20-period EMA but has the advantage of that you combine both of these indicators instead of just relying on a single one.

This trade from AuthenticFX shows a good example of it in play.

The yellow band combines both the 20-period EMA and the Bollinger mid-band together.

The polarity indicator allows you to find signals of an imminent trend where other methods may not.  If you look inside the white circle, you will see a morning star movement at the polarity indicator.

The morning star indicates a change in trends from bearish to bullish so you will be able to see that the downtrend is ending.

The Bladerunner reversal strategy

While we are on the subject of Bladerunner, I thought I would briefly talk about the Bladerunner reversal strategy.  It is basically another form of the Bladerunner method.

It is based off using the forex polarity indicator which combines both the 20-period EMA and the Bollinger mid-band.

When using this strategy, you will be looking for the price action that breaks out of a channel and has a decent trending strength, stalls, and reverses through the polarity indicator.  It will then come back for retesting from the other direction.

This strategy is the same as the Bladerunner trading method as they both trade in the direction of the trend.  It is directly determined by the price action closing on the right side of the polarity indicator.

The difference between the Bladerunner and the Bladerunner reversal strategy is that the original Bladerunner method waits for a pattern to confirm it’s trending.  Only from here do trades move with the polarity indicator in the corresponding direction.

The Bladerunner Reversal on the other hand takes action when the trend has completed and the price closes on the other side of the polarity indicator.

Like I said i’m not going to go into too much detail on this method but hopefully you should have a decent idea from this about how it works.

To sum up

Because this strategy relies only on price action, a lot of subjective factors are eliminated.  I think that’s what makes it so simple really.

If you have read this and have thought to yourself that you want to try it out, you will find it incredible enjoyable.  Not only that, you should hopefully find it a profitable strategy.

While you are here, you should check out our free ebook.

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