The Blade Runner trade - Introduction
The Blade runner trade is a forex trading strategy based on pure price action to identify the patterns in the market. This trading strategy requires no specific time frames. Every time frame suits the strategy, and the traders can also trade with any currency pairs in the market.
No off-chart indicators are used in this price action strategy of trading. Instead, it requires candlesticks, support and resistance levels, rounded price figures, and pivot points for trading. The on-chart indicator that the approach primarily uses is the 20 period EMA (exponential moving average). The middle line of the 20 period Bollinger bands is an alternative.
This strategy is named as the Blade Runner Trade because, the 20-EMA cuts the price action in a knife-edge. The EMA provides higher weight and significance on the most recent data points and measures trend directions over some time. The blade runner traders can compare the actual price action to their charts indicating the variations, and make necessary changes to their trades.
If the price is above the EMA and retests, an upward movement is expected to continue. The traders can wait for it to fall and touch the EMA. Similarly, if the price is below the EMA, a movement towards down is expected to be continued, and the traders can wait for it to rise and touch the EMA.
Also, when the price is through the EMA, the trend reversal can be expected. The first candle that approaches the EMA must close on the same side as the EMA. This candle is referred to as the signal candle. When the candle approaches the EMA, the price will get rejected from the EMA. Then, the next candle confirms and continues the move, and it becomes a confirmatory candle.
Entering a trade
This trading approach is a simple method of trading. The price actions create accurate predictions logically, and it guides to trade on favorable market conditions.
To enter into the market with this strategy, the essential parameters are
- Price must break out of the prior range, or it must be trending.
- Price must have completed a successful retest.
The traders can have the following notes into consideration before entering into the trade.
- It is good to look for the confluence (the state when more than two indicators identify the same price level where price actions are likely to react) before entering into the trade.
- Any unexpected announcements through any media can create volatile movements on forex prices. So, it is advisable to stay updated about the current affairs and news updates to gain the necessary information for trading.
- Always direct towards the current trends, as determined by the 20-EMA retest.
With that being said, let’s see the step-by-step approach for both the short and long entries in trading with the blade runner strategy.
For a short entry
- Place stop orders 2 pips below the confirmatory candle. (It expires when the new candle starts.)
- Place stop loss 2 pips above the signal candle that touched the 20-EMA.
- Set the take profit point of the first order that equals the risk in pips. For example, if the risk in pips is 20, the take profit point of the first order should be 20 pips.
- Set the take profit point of the second order that equals double the risk in pips. Example, if the risk is 20 pips, the take profit point of the second order will be 40 pips.
For a long entry
- Place stop orders 2 pips above the confirmatory candle. (It expires when the new candle starts.)
- Place stop loss 2 pips below the signal candle that touched the 20-EMA.
- Set the take profit point of the first order that equals the risk in pips.
- Set the take profit point of the second order that equals double the risk in pips.
When the price action is moved in the estimated direction, and it reaches the first profit point, one of the orders will be closed. Then the stop loss on the second order will be moved to breakeven. It will be dropped in the breakeven state until the market closes the trade either by reaching the profit target point or ending at breakeven. Hence, it is better to set the profit targets at realistic levels to make the profits achievable.
The blade runner strategy is one of the simplest among the forex trading strategies as it relies entirely on price actions. Also, most of the subjective factors are ignored and eliminated. Even though the blade runner trade strategy is flexible and not rigidly time-dependent, it sometimes works more reliable during the Asian markets. So, traders can observe the market changes and wait for the right time before entering into a trade.