Linda Bradford Raschke

1. AIQ Opening Bell, August 1997: interview “Short Term Trading Strategies” — interview, 1997
   Hosted on lindaraschke.net; contains the written rules of the Holy Grail, Three-Day Unfilled Gap Reversal and Wolfe Wave patterns.
2. Active Trader, February 2004: “Trading Style and Daily Market Regimen” — interview, 2004

• FilterHoly Grail (long): the 14-period ADX must first be above 30 and rising.
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• FilterDo not put capital to work in the middle of a trading range: buy new highs or pullbacks.“don’t put your capital to work in the middle of a trading range”
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• EntryWait for a retracement to the 20-period exponential average (usually with the ADX turning down). When price touches it, place a buy stop above the high of the previous bar. Sells are the mirror image.
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• EntryThree-Day Unfilled Gap Reversal (buy): today the security gaps lower and does not fill the gap. For the next three sessions keep a buy stop one tick above the high of the gap-down day.
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• EntryWolfe Wave (buy): wave 2 is a top, wave 3 the bottom of the first decline after it, wave 1 the bottom before wave 2 (point 3 lower than point 1), wave 4 the top of wave 3 (higher than the wave 1 bottom). A line from point 1 through 3, extended, projects the entry point (wave 5).
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• EntryShe tries to trade in the direction of the most recent greatest swing on her time frame, and brackets a longer-time-frame entry (part at a bid, a buy stop higher in case of no fill).
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• EntryThe day after an NR7 day she usually brackets stops around the early-morning range; in her tests it did not matter whether the first 45 minutes or the first hour was used.
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• StopAfter the fill, place a protective sell stop at the newly formed swing low and trail it as profits grow.
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• StopGap reversal: if filled, the protective sell stop goes at the low of the gap-down day; accrued profits are protected with a trailing stop; if not filled within three sessions, cancel the order.
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• ExitIf the pattern does nothing after touching the average (no gain, no loss for several days), she says there is no reason to be in the trade: “don’t give it the benefit of the doubt”.
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• ExitWolfe Wave target is the line from point 1 to point 4; the initial stop goes just beneath the new reversal at point 5 and can quickly be moved to breakeven. One cannot start looking before points 1–4 exist.
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• ExitMost often she gets out when the market fails to do what she expected; the best patterns give instant feedback. When a trade feels uncomfortable she may place an exit-on-close order to remove the stress of timing the exit.
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• ExitOn scalps she does not trail stops and exits in one piece: the shorter the time frame, the higher the noise and the more likely a trailing stop is hit.
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• Size and riskA 60% win rate system still produces five losers in a row at some point out of ~200 trades about 90% of the time, so a wide-stop system with such odds needs minuscule leverage or many markets (about 20).
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• DisciplineLosing streaks come from sloppy habits, trader error or stubbornness; a small loss should never become a big one. Switching methods at their drawdown low leaves you one step out of sync.
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Often attributed to this trader, but not found in the sources above. Not listed as his or her rules.

• Figures like “70% winners, $450 average win vs $200 average loss” circulate on third-party pages; they are not in these interviews.
• The 80-20 and Turtle Soup patterns are attributed to her; their rules are not in the two documents read here.

The 1997 rules are for stocks and futures of that time; she says herself that she does better using discretion than trading a system, and calls mechanical systems’ edge small. Treat the patterns as hypotheses to test, not as proven edges.