Linda Raschke: Great trading resource

Linda Raschke was one of the well-known traders that the discretionary trader at the hedge fund repeatedly pointed me towards to.  He had a lot of respect for some of her viewpoints regarding trading techniques.

Just came across some earlier notes from working through some of her publications and thought I quickly share them here (see below).  Basically a list of insights I had gained, or technical points that I wanted to draw attention to for myself.

On lindaraschke.net, there are a bunch of free-to-read materials published by Linda Raschke.  As an example, here’s an article of hers on volatility breakout strategies.  Thanks to Fredrik Wilkens,  one of the systematic traders I follow on Twitter (a good guy to follow!) who tweeted that several weeks ago.

Hence, here’s a copy of study notes from several Linda Raschke articles – hope you find it interesting/helpful and are inspired to study her work further:

4 Important Principles

  • Trends generally continue
  • Trends typically reach an exhaustion point/climax
  • Price will tend to consolidate/trade sideways prior to beginning a trend in the opposite direction
  • Momentum precedes price – a new high in momentum will generally precede further new highs in price – thus, traders should enter new (breakout?) trades after new momentum highs
  • Volatility tends to decrease in later stages of the trend (IV drops? Good for buying options?)

Market Structure

  • Swing Points = Waves; Raschke uses 2.5 ATR move from last 14 bar high/low
    • Quite some overlap with Voigt
  • Patterns in the swing points => trend assessment
  • Price moves in impulse moves or correction moves
  • Continuation Patterns – Flags
  • Reversal Pattern – V Spike – strong reaction accompanied by high volume – rare but meaningful
  • Importance of prior session high/low, how price reacts at those levels, and what the prevalent trend is (if any)

Types of entries

  • Entering on corrective move, in the direction of the trend
    • Holy Grail setup
  • Entry at point of reversal – price level at which the trend ‘changes’ from up to down or vice versa
  • Power Buy/Sell – a corrective move, entering in the direction of the trend (more complex)
  • Failure Test?
  • Breakout from a tightening/coiling range
  • Best to trade the initial pullback? Trading later pullbacks have less chance of success? Also applies to Holy Grail setup

Setting Targets

  • Target prior swing point
  • Target relevant MA
  • Target equal swing distance
  • In strong trend – don’t set targets

Useful indicators

  • Keltner channels – to show a thrust in momentum – 2.5ATR bands around a 20 EMA
  • Oscillator – also to show momentum
  • 3/10 Oscillator – SMA3, SMA10, and SMA16 of the difference between SMA3 and SMA10
    • 10-period ROC? Continue buying pullbacks if momentum continues to make new highs.
  • EMA20

Business Planning

  • Need for a bread & butter trade
  • Need for environment, processes & routine
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3 Responses to Linda Raschke: Great trading resource

  1. Malen says:

    Great post George. She’s indeed terrific and offers lots of valuable insight for “process” and a “super ” woman 🙂 ..she was my inspiration back then …and I was lucky enough to meet with her twice in NY and in Paris … also attended one of her few trading camp . Gathered lots of her material …. Thanks for the post : great starting point to review some material.

    Liked by 1 person

  2. Malen says:

    Note: as for the observation on volatility ….check volaitility’s heteroscedasticity as one of the specific property of volatility

    Liked by 1 person

  3. pearse13 says:

    Excellent information. Thanks !!

    Liked by 1 person

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