Linda Raschke Interview Notes

On June 5 I participated in an interview / conference call with Linda Raschke. Raschke is likely most known for her excellent track record as a short term S&P 500 futures trader. I took some notes during the call and have done my best to make sense of my scribbles below

Two additional sources of great information on Linda can be found here:
1) “Linda Bradford-Raschke’s 5 trading patterns” (PDF document)

2) The New Market Wizards: Conversations with America’s Top Traders by Jack D. Schwager (Amazon Link)

Below are my notes on her thoughts:

WHERE SHE TRADES:

95% of profitability is on futures
Have a game plan before the market opens
ABC setups
120 Minute flags

HOW TO BECOME A PROFESSIONAL TRADER:

1) Practice - similar to golfer or musician
2) Do it, model, after 2-3 years hope to see some improvement and proficiency and find a niche that works for you
3) Make trades. 1 trade, 100 trades, 1000 trades, 5000 trades. After 5000 you should hopefully have a level of proficiency.

FAVORITE BOOKS:

Favorite money management book:

Kenneth Grant - Trading Risk: Enhanced Profitability through Risk Control. (Amazon Link)
Book addresses the importance of maintaining an active trading rhythm - feel it when the door opens and more volume comes in

Favorite other book:
Roy Longstreet - Viewpoints of a Commodity Trader - 2 pages in there are particularly helpful.
90% of the time most professional traders trade with 50% of their line or less.

PSYCHOLOGY:

A) Look into sports psychology books - $20 bucks buys you a great book

B) Emotions - less emotional the better - even temperament - get more even tempered with more experience

The best traders don't beat themselves up and don't let it go to their head if / when they are making big money

THINGS A BEGINNER NEEDS TO DO:

A) Get experience executing - 3 months of practice just getting out in 1 tick. Execution becomes automatic.

B) Newer you are to trading the shorter your holding period should be. The less time you are in the market the less risk you have. Longer you are in a trade the more objectivity you will lose

Could she recommend one strategy for a beginner to start with?

Take 2 time frames - 5 min and 15 minute use the two together and look for a pullback on the 15 min time frame in the direction of the trend but wait for the divergence on the 5 minute to trigger your entry.

Divergence - can give you a level of an absolute stop - shouldn't take out the last high or low. Don't want to fade the trend. Don't short a sell divergence when there are new highs being made daily.

WHAT IS SHE DOING NOW?

1 trick pony - does the same thing over and over but with bigger size. That's really the big secret. Find a niche. Find what you are good at and just learn to do it bigger size.

BOOKS MENTIONED: