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The Bladerunner Strategy: A Useful Approach in Forex Trading

July 21, 2021
by Leon Marshall,

Forex trading can be approached from many angles, and one of them is the Bladerunner strategy. Based on the 20-period Exponential Moving Average (EMA), it is a suitable strategy across all currency pairs and timeframes. It is given the term Bladerunner because the EMA cuts the price action in two, like a blade. Using price action to find entries, traders utilise the Bladerunner method to be bullish on markets trading above the 20-period EMA, or be bearish if it is below the EMA. This approach is useful in forex trading as it removes the need for other off-chart technical indicators, such as RSI, MACD, Stochastics, and more.

The Bladerunner Strategy In Practice

In practice, if the price is trading above the EMA, traders get ready to open a long position as soon as the asset drops in price and retests the EMA. Traders are hoping that the upward momentum will then continue.

However, market volatility can result in the asset’s price to drop below the 20-EMA. This would be considered a switch in direction from an uptrend to a downtrend. In this situation, traders would look for opportunities to go short as the asset’s price retests the EMA and continues in a bearish trend. This is how traders ride the waves of trends after tests to the EMA line.

Beware Of Price Trends

A person using a grinder.

With that in mind, there are some factors that need to be considered before utilizing the Bladerunner strategy to trade successfully. One of them is the price trend. If the asset’s price is trending or if there is a breakout from a trading range then this would be a good time to enter the market using this strategy. However, it’s also best to wait for a retest of the EMA before opening a position. Basically, the price needs to bounce back if it is below the EMA or vice versa if the trader is going short.

Where a beginner trader might look at the EMA alone to determine an entry point, experienced traders know they also need to look at the approaching candle. This is known as the signal candle and it needs to close on the same side as the EMA. If it does, and the next candle moves away from the EMA, you would have a confirmatory candle and can look at entering a trade. If not, it’s best not to enter the trade just yet. Additionally, you would analyse the market movement over the last few months to calculate where the market could go next, given the recent price changes and events.

Managing the Risk

The blade of a knife.

When going long, traders may decide to place stop orders 2-3 pips above the confirmation candle and a couple of stop losses 2-3 pips below the signal candle. A common approach to setting stop orders is to aim for a profit target equal to the risk in pips with the first one and set the second one to be double the risk in pips. When going short, the stop orders are placed a couple of pips below the confirmatory candle and the stop losses above the signal candle. Everything else would follow the same steps as when going long.

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