Linda Raschke on Swing Trading: Rules and Philosophy for Consistent Profits

The Art of the Swing: Linda Raschke's Approach to Swing Trading

Swing trading, as practiced by Linda Raschke, is a disciplined art form focused on capturing the short-term "swings" in the market. It is a style that requires patience, precision, and a deep understanding of market dynamics.

Core Tenets of Raschke's Swing Trading

• Focus on the Tape: Raschke emphasizes the importance of "reading the tape" – paying close attention to price and volume action to gauge the market's true intentions.
• Timeframe is Key: Swing trading typically involves holding positions for a few days to a few weeks. Raschke often uses daily and 60-minute charts to identify swing trading opportunities.
• Trade the Pattern, Not the Prediction: Rather than trying to predict where the market will go, Raschke focuses on identifying and trading high-probability patterns. This removes emotion from the decision-making process.

A Swing Trading Setup: The 3-Day High/Low

One of Raschke's classic swing trading setups is the 3-day high/low. The rules are as follows:

• Long Setup: The market makes a new 3-day low and then closes above the previous day's high. This indicates a potential reversal and the start of a new upswing.
• Short Setup: The market makes a new 3-day high and then closes below the previous day's low. This signals a potential top and the beginning of a downswing.

Risk Management for Swing Traders

As with all of her strategies, risk management is paramount. Swing traders should use stop losses to protect their capital and have a clear plan for taking profits. A common approach is to use a trailing stop to lock in gains as the swing progresses.