Linda Bradfore Raschke Focuses on Technicals
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Finance > Currency Trading
Apr 18, 2007
Linda Bradfore Raschke Focuses on Technicals
After spending six years trading on the floor, first at the Pacific Coast Stock Exchange and then at the Philadelphia Stock Exchange, Linda Bradford Raschke shifted gears and moved to an off-floor office in 1987. After trading her own money for several years, she moved into the money management side of the business in early 1993. Raschke, along with her partner Rick Genett, manage about $25 million. Raschke calls herself strictly a technical trader. She doesn't even have a news service in her office. Nonetheless, she says "it's a trader's responsibility to always be aware of background information. That may be a fundamental situation like shortages or seasonal tendencies or just general items like that. But, what actually makes me pull the trigger and enter a position is strictly technical." While Raschke has been trading now for roughly 15 years, she still searches out the same type of technical patterns to trade. "I think the markets are the same they've been for the last one hundred years. They are the same in that you are going to have an impulsive move in the direction of the trend and you are going to have pullbacks ... there are still going to be climax patterns and consolidation patterns," she said. "My decision making and the patterns haven't changed one bit," she added. She studies roughly 20 different markets, but tends to limit her trading to five or six markets at a time. "You get sloppy if you have more than five or six opportunities." Raschke looks for opportunities in both trending markets and those that are moving sideways. "In trending markets you are finding conditions where an uptrending trade moves from the low to the high. The best buying opportunity will come, if not on the open, then in the first hour," she said. The trade-off for a greater reward in a trading market situation is "that the risk points will be further way .. but you have momentum in your favor and have a greater likelihood for success. "In a choppy (sideways) market you are going to be more conscientious in looking for fake-outs and whipsaws," Rascbke said, adding that one is able to use tighter stops in a sideways market. Nonetheless, Raschke believes "you can always trade any kind of market-you just have to be clear on your approach." She trades in several different time frames and lets the particular chart dictate the expected length of the trade. "If a pattem is there on the dailies, it might last anywhere from two to six days," she said as an example. However, "in the longer time frames (such as weeklies or monthlies) there is a bigger risk and a bigger reward," she added. While some traders utilize specific risk reward ratios, ahead of trade implementation (risk one to gain three is common), Raschke doesn't like to limit herself to only three on the reward side. "I don't believe in risking one to gain three, because you never know what the market is going to give you ... I've put on a particular trade and low and behold the market starts picking up momentum and I'm going to stay with it as long as I can. I'm not going to get out of it just because I hit my three-threshold level." On getting out of losers, Rashke says "it's the trader's responsibility to manage a trade ... when I'm wrong I know it. The market tells you." In terms of beginning traders, Raschke notes "if somebody is starting out trading--start out at a short-term time frame to control your risk better." In fact, even in her own trading, "if I'm going through a period that's not as good, I'll tighten up my time frame and build up capital," she said. As an off-floor trader, Raschke said, "You can't be as concerned with trade locations. You are going to pay up to get in and out of positions." Now that she has money under management and is trading much larger size "slippage is a problem." "Liquidity can be a problem. Getting out of bad trades, that's where you can get hung out to dry," she said. For shorter-term trades in "coffee, I wouldn't put on a full position... because if I was wrong it could cost me four points to get out." On how Raschke feels that she has evolved as a trader, "I would say if anything, I'm more risk averse now and that might be because I'm trading larger size ... when you are young and in your 20s there will be a lot more volatility in your account." Also, now "I watch myself a little more. In the process of evolving as a trader, you learn to watch yourself more ... a lot of times the mistakes you make in the markets come from reactions and emotions ... when you lose at this game you are beating yourself," she said. "The difficult thing for people is that you have so many choices-time frames, different markets, to trade the trend or the countertrend-you can't do it all. You have to sit down and say I'm going to do this one kind of trading. A lot of people initially are trying to do it all," she said. Success in trading requires a lot of concentration, Raschke said. "You can get overwhelmed by the amount of information. I don't even have news in my office. There is so much noise out there-you have to filter out the noise." Commitment is one of the main ingredients for success in trading, Raschke added. "You have to spend the time doing the necessary homework or preparation and don't let yourself get taken out of the game," she said. She concludes, "you have to have a long term time horizon ... on the floor there are a lot of months you just grind it out and eke it out and then you'll have a few glorious months. You just have to have patience and trust that all the seeds you are planting will eventually bloom."
Martin Chandra is a full-time investor. He has been researching investment strategies and make his own living. For more information please go to here.
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