The Trading Principles of Linda Bradford Raschke: 12 Technical Analysis Rules That Build Wealth

Linda Bradford Raschke stands as one of the most accomplished technical traders in modern financial history. Her journey from a commodities trader on the Pacific Stock Exchange to a hedge fund manager who built a personal fortune represents a masterclass in disciplined trading methodology.

Who Is Linda Bradford Raschke and Why Her Methods Matter

Raschke grew up immersed in financial markets through her trading family. Her father introduced her to the intricacies of market dynamics from an early age, and she developed a particular fascination with price charts and pattern recognition. She began her professional career as a commodities trader, eventually becoming a registered adviser. What distinguishes her approach is an unwavering commitment to technical analysis—she firmly believes that traders can succeed without extensive market theory, because successful trading ultimately depends on recognizing patterns that emerge when institutional capital enters the market.

Her track record validates this philosophy. Linda Bradford Raschke’s hedge fund, LBR Group, was ranked 17th out of 4,500 funds for its best 5-year performance by BarclaysHedge. Since 1992, she has continuously traded from her own money-managed program, proving these principles work across decades and market cycles. Her willingness to share her knowledge through books, blogs, and educational content has made her methodology accessible to traders at all levels.

The foundation of her success lies in meticulous planning and iron discipline. Raschke structures every trade idea, position size, and exit plan before entering the market—and remarkably, she almost never deviates from her predetermined rules. This systematic approach, combined with her deep understanding of market microstructure, forms the basis of her 12 trading principles.

Entry and Exit Rules: Pullbacks, Rallies, and Market Reversals

The first principle captures Raschke’s stance on timing: buy the first pullback after a new high, and sell the first rally after a new low. This approach capitalizes on the natural rhythm of trending markets—momentum extends, retraces slightly, then resumes. Traders who wait for pullbacks to established highs typically enter with better risk-reward ratios than those chasing breaks.

Closely related is her insight about morning versus afternoon reversals: the best trading reversals occur in the morning, not the afternoon. Market reversals that form during morning hours tend to carry more conviction because they represent a shift in the day’s direction from the open. Afternoon reversals often lack follow-through and frequently prove false signals.

Time-Based Patterns: Morning Strength, Afternoon Performance, and Market Gaps

Raschke emphasizes that afternoon strength or weakness should demonstrate follow-through the next trading day. When a market closes strong in the afternoon, opening higher the following morning often signals genuine momentum rather than intraday noise. This continuation principle extends to gaps: the larger the market gaps, the greater the odds of continuation and a sustained trend. Gap formation typically indicates overnight sentiment shift among institutional participants.

The way markets behave around the previous day’s high or low serves as a crucial technical indicator. These pivot points represent where buying or selling pressure emerged during the prior session. The market either tests and reverses off these levels, showing technical resistance, or pushes through and demonstrates signs of continuation—revealing whether institutions are defending or abandoning those price areas.

Volume and Continuation: Reading Market Strength Through Trading Activity

The final hours of trading often reveal the true strength of a trend. During the last hour, “smart money” typically shows its hand by marking positions in their favor and continuing to add to winning trades. As long as a market prints consecutive strong closes, the uptrend is likely to persist. The critical reversal warning signal appears when a morning rally is followed by a weak close—this combination suggests the institutional bid is weakening.

Volume at the close carries predictive power. High volume on the close implies continuity the next morning in the direction of the last half-hour’s trading. In strongly trending markets, this principle becomes especially reliable—look for the trend to resume during the final trading hour when volume confirms the direction.

These 12 principles, developed and refined through decades of Linda Bradford Raschke’s professional experience, represent a coherent system for reading market structure. Rather than relying on prediction or intuition, Raschke’s methodology extracts objective signals from price action and volume—the visible record of what institutional traders actually did. This systematic discipline, combined with the willingness to wait for optimal setups, explains both her sustained profitability and her influence on modern technical analysis education.