Bladerunner Forex Strategy

The term ‘Bladerunner’ is very suggestive of a popular sci-fi movie known as Bladerunner. The name ‘Bladerunner’ comes with a lot of compelling curiosity to the world of forex trading, more so, to forex traders that are fans of the popular sci-fi classic.

A ‘Blade’ is generally known to be a sharp cutting object or the sharp cutting part of a tool or weapon. Therefore, we instinctively know that the term ‘Bladerunner’ conveys the idea of a cutting tool in motion. This perpetuated idea is very much synonymous with the operations of the Bladerunner trading strategy in forex.

Bladerunner forex strategy is a high precision trading strategy used by market participants to identify the best and most accurate entry and exit points for a trade idea across all timeframes and assets or forex pairs.

We will delve into the Bladerunner strategy and how it can be applied to make bountiful profits from the forex market.

What are the Fundamental Concept of the Bladerunner Trading Strategy

It can be argued that the majority of indicator-based trading strategies make use of moving averages but the Bladerunner strategy offers a more unique approach.

The strategy relies wholly on pure price analysis relative to the moving average of price data over a certain lookback period.

The Bladerunner strategy is based on 4 concept

1. Moving average; 20-period EMA
2. Support and resistance
3. Pure price analysis (candlesticks analysis)
4. Retest

1. Moving average:

Moving averages play a significant role in the analysis of price data and price movements of any asset or forex pair. Of course, it serves different purposes to different categories of traders but primarily, it is used to determine the market direction bias, also, to formulate different trading strategies.

The exponential moving average (EMA) places greater significance on the most recent price movements and data points.

Customarily, the Bladerunner strategy by default uses a 20-period exponential moving average (EMA), which is based on the closing prices of trading activities on any timeframe.

The 20-period EMA always acts like a blade that cuts through price and major price zones thereby presenting a trending market environment or directional bias suitable for highly probable trade ideas and setups.

In addition, it shows noteworthy significance on immediate changes in price movement because it normally cuts through price to lead a sustainable trend.

The 20-period EMA is the stand-alone indicator of the Bladerunner strategy i.e. it is the only technical indicator required but offchart indicators (indicators located below the price chart like MACD, RSI or Stochastic) may be added for confluence confirmations.

2. Support and resistance:

A good understanding of the areas of support and resistance and what they mean for potential future price movements cannot be underestimated

They are significant historical levels where supply and demand orders have been initiated in the past or where market participants have previously bought and sold multiple times in the past.

These historical levels automatically act as support when price is above it and then as resistance when price is below it.

Typically, when price movement falls below support, it indicates weakness in the underlying asset or forex pair and is suggestive of future lower lows conversely when price breaks through resistance, it is indicative of strength in the underlying asset  – though this isn’t always the case. There are a few other market analytic elements that does the basic functions of support and resistance. A few notable market analytic elements are pivot points, institutional big figures also known as round numbers, historical and recurring supply and demand reference points.

Bringing these two concepts all together provides a perfect market environment for highly probable setups.

When price rises above resistance zones, it is indicative of strength and future higher highs. In addition, if price is also clearly above the 20-period EMA, the directional bias for that asset or currency pair is highly bullish and so only long setups will be greatly favoured. If the EMA cuts through price, this means the asset or forex pair has probably changed its directional bias. This market environment becomes highly favourable for short setups if price stays clear below the 20-period EMA and also breaks through support levels.

3. Pure price analysis and setups:

Apart from the 20 period EMA and the support and resistance zones, no other on-chart or offchart indicator is required but they can be used for confluence confirmation.

The application of pure price analysis is majorly for the purpose of validating a trade idea and executing entries at highly precise turning points. And so much emphasis is laid on pure price analysis which entails candlestick patterns, market structure, institutional order flow, orderblocks, liquidity pools, fair value gaps (FVGs),  volatility cycles. This among others makes up the pure price movement analysis used to identify and initiate highly precise trade entries from consolidation breakouts or retest on the 20-period EMA, support and resistance levels.

4. Retest:

A good retest is confirmed by a signal candle and a confirmation candle.

The signal candle is like an alert candle for a supposed trade setup. The candle moves and closes directly opposite the directional bias touching on the 20-period EMA or any form of support/resistance level.

The confirmation candle; after the signal candle has formed, wait to see if the following candles will confirm the trade idea.

The following candlesticks must confirm the retest by any type of pure price entry pattern that is in accordance with the directional bias of any forex pair. The pure price entry pattern could be in the form of an engulfing candlestick, pin bars, orderblocks or other candlestick entry patterns. However, traders may need additional confirmation from other indicators before taking the trade because a trade setup is more highly probable when there is more than one reason to trade.

Bladerunner Trade Setups

Bladerunner forex strategy is used to either trade the breakout of a consolidation or identify trade setups in a trending market environment.

1. Trading the breakout of a price range or consolidation:

In order to use the Bladerunner strategy to trade breakout of price ranges or consolidation, the following criteria must be met

criteria for Bladerunner breakout trade setups

• Identify a trading range or consolidation
• wait for price to break out and leave the trading range

If bullish

• After the breakout, the price movement must remain clearly above the 20-period EMA.
• Execute a long market order on the ‘complete retest’ of either

1. The upper level of the consolidation (as support).
2. Any significant support zone.
3. The 20-period EMA as a dynamic support.

If bearish

• At the breakout, the price movement must remain clearly below the 20-period EMA.
• Execute a short market order on the ‘complete retest’ of either

1. The lower level of the consolidation (as resistance).
2. Any significant resistance zone.
3. The 20-period EMA acting as a dynamic resistance.

Any ‘complete retest’ that fulfils the above conditions is a valid setup.

An example of a bullish breakout trade setup on the EURUSD daily chart

An example of a bearish breakout trade setup on GBPCAD 1 hour chart

2. Trading the bladerunner strategy in a trending market environment

Guideline for trend setup

• Confirm an existing trend, bullish or bearish direction bias.

If bullish

• Price movement must remain clearly above the 20-period EMA.
• Confirm a successful first retest on the 20-period EMA.
• Wait for price to retest again on either a support level, pivot point, demand zone or the 20-period EMA as a dynamic support.
• Execute a long market order on a successful second and third retest.

If bearish

• Price movement must remain clearly below the 20-period EMA.
• Confirm a successful first retest on the 20-period EMA.
• Wait for price to retest again on either a resistance level, pivot point, supply level or the 20-period EMA as a dynamic resistance.
• Execute a short market order on a successful second and third retest.

Example of a sell setup on GBPUSD Daily chart

Example of a buy setup on EURCAD 30 Minute chart

Risk Management

The best forex trading strategy in the world with poor risk management will result in inconsistency in making profits, more losses and even lead to frustration.

This is a guideline given to effectively manage risk exposure when trading with the Bladerunner strategy.

Timeframes: Timeframes may vary but the strategy proves to be more suitable for day & short term trading on the daily, 4hr and 1hr timeframe.

For enough frequency of quality setups, short term trading is preferable.

High Probable Trading Sessions: Asian, London and New York sessions are the highest probable time window of opportunity to seek explosive and profitable price moves. The market volatility outside these sessions is almost unpredictable in terms of direction, displacement and speed.

Lot Size: No more than 5% of an account size/equity should be executed on any trade.

Entry: A market order should be executed at the confirmation of a good retest by pure price patterns and perhaps with confluences of other factors and indicators.

Stop Loss: The approximate number of pips apt for stop loss placement depends on the timeframe. For instance, stop loss of 100-200 pips is recommended for trades taken on the monthly or weekly timeframe. For day and short term trading on the daily, 4hr and 1hr chart, stop loss of 30 - 50 pips is sufficient and then for scalping, 15 - 20 pips on average is sufficient.

Profit Management: This is one of the most important aspects of risk management practices. The Bladerunner forex strategy is great for trade setups of 1:3 risk to reward ratio (RRR).

There are various methods to which profits can be managed but to manage profits of the Bladerunner strategy. These two methods are very effective (i) Partial profits and (ii) Breakevens.

(i) Partial profits: Assume an open position is running on profit, it is important to take partial profits off the market at some point. This is to cover for the set stop loss and ensure a risk-free trade.

If the trade runs profitably to a risk to reward of 1:3 RRR, 80% of the profit should be banked off and 20% should be left to safely profit from any further price moves.

(ii) Breakevens: Breakeven should be set at the entry price when a trade is on profit of at least 1:1 RRR. This is to insure a profitable trade setup from reversing into a losing trade.

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