Born 1959, Linda Bradford Raschke is an American trader, operating mostly as a futures trader. Linda started her trading career in 1981 making markets in options. Later, she became a registered CTA (Commodity Trading Advisor) and founded LBR Asset Management.

 

LINDA BRADFORD RASCHKE TRADING TIPS

■ The ability to perceive patterns in the market

I believe my most important skill is an ability to perceive patterns in the market. I think this aptitude for pattern recognition is probably related to my heavy involvement with music.

 

■ Be contrarian to the panic

Some of the best trades come when everyone gets very panicky. The crowd can often act very stupidly in the markets. You can picture price fluctuations around an equilibrium level as a rubber band being stretched... if it gets pulled too far, eventually it will snap back. As a short-term trader, I try to wait until the rubber band is stretched to its extreme point.

 

■ The accuracy of a prediction drops off dramatically, the more distant the forecast time

I believe that only short-term price swings can be predicted with any precision. The accuracy of a prediction drops off dramatically, the more distant the forecast time. I'm a strong believer in chaos theory.

 

 

■ The ideal trade lasts ten days

There are too many unpredictable things that can happen within two months. To me, the ideal trade lasts ten days, but I approach every trade as if I'm only going to hold it two or three days.

 

■ There is a tendency for the markets to move lows to highs every two to four days

One of my favorite patterns is the tendency for the markets to move from relative lows to relative highs and vice versa every two to four days. This pattern is a function of human behavior. It takes several days of a market rallying before it looks really good. That's when everyone wants to buy it, and that's the time when the professionals, like myself, are selling. Conversely, when the market has been down for a few days, and everyone is bearish, that's the time I like to be buying.

 

■ Tracking TICK and TRICK indicators

I also track different indicators. I don't think the specific choice of indicators is that critical, as long as you have a good feel for interpreting the indicators that you use. Personally, I pay close attention to the:

• TICK [the difference between the number of issues whose most recent tick was up and those whose most recent tick was down],
• TRIN [a measure that relates the price and volume of advancing issues to the corresponding figures for declining issues], and premium [the premium, or discount, of stock index futures to the theoretically equivalent cash index price].
• For example, if the tick is at an extreme level and falling- -480, -485, -490, -495-and then just pauses--495, -495, -495- and the other indicators I watch are also oversold, I'll often go in and buy at the market. Sometimes, I've actually bought the low tick of the day using this method.

 

■ Advice to novice traders

1. Understand that learning the markets can take years.
2. Immerse yourself in the world of trading and give up everything else.
3. Get as close to other successful traders as you can. Consider working for one for free.
4. Start by finding a niche and specializing.
5. Pick one market or pattern and learn it inside out before expanding your focus. My favorite exercise for novice traders is picking one market only. Without looking at an intraday chart, jot down the price every five minutes from the opening to the close. Do this for an entire week.
6. Be in tune to the patterns.
7. Where are the support and resistance levels? How does price act when it hits these levels? What happens during the last half-hour? How long does each intraday price move last? You won't believe how much you can learn from this exercise.
8. Never fear the markets. Never fear to make a mistake. If you do make a mistake, don't complicate the position by trying to hedge it- just get out. Stay actively involved with the market.
9. Don't just sit passively in front of a monitor, or simply stare at charts. Notice how many old-timers who have been successful for years still construct their own point-and-figure charts by hand intraday.
10. They keep the same routine day after day. Develop your own routine for taking periodic market readings.
11. Never be greedy. It's OK to leave money on the table. If you can't get in at a favorable price, let the trade go and start looking for the next trade.
12. Finally, remember that a trader is someone who does his own work, has his own game plan, and makes his own decisions. Only by acting and thinking independently can a trader hope to know when a trade isn't working out.
13. If you ever find yourself tempted to seek out someone else's opinion on a trade, mat's usually a sure sign that you should get out of your position.

 

■ Attitude matters

Attitude is how you deal with the inevitable adverse situations that occur in the markets. Attitude is also how you handle the daily grind, the constant 2 steps forward and 2 steps back.

 

■ It's better to have the wrong idea and good timing than the right idea and bad timing

I try to wait until things set up just right before I take a trade. Then, when I'm ready to take the trade, I slowly count to ten before I pick up the phone. It's better to have the wrong idea and good timing than the right idea and bad timing.

 

■ The real skill is in not losing money

The good traders are the ones who can hold their ground the majority of the month and participate in that small handful of trades that are windfalls. The real skill is in not losing money.

 

■ Don't try to make a profit on a bad trade

Perhaps my number one rule is: Don't try to make a profit on a bad trade, just try to find the best place to get out. 

 

■ You have to be willing to take what the market gives you

I’m also a firm believer in predicting price direction, but not magnitude. I don’t set price targets. I get out when the market action tells me it’s time to get out, rather than based on any consideration of how far the price has gone. You have to be willing to take what the market gives you.

 

■ It’s better to exit your position in the direction the market is moving

Most markets move for only so long in one direction before having a reaction back in the other direction.  It’s better to exit your position in the direction the market is moving and benefit from positive slippage than it is to trail a stop. 

 

■ Successful traders do not talk about their success

Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.

 

 

■ Linda Bradford Raschke (Derivatives trader)

Forex-Investors.com (c)

 

 

TWITTER:	» @LindaRaschke
LINKEDIN:	» Linda on Linkedin
BOOKS:	» On Google Books