Linda Raschke: Trading Rules, Setups and Books

Linda Bradford Raschke has traded professionally since 1981 and is one of the few women in Jack Schwager’s Market Wizards series. She did not become known for a secret formula. She became known for short-term setups with clearly written rules: pullbacks in a running trend, failed breakouts and the first move of the trading day. Many of these setups still carry the names she and Laurence Connors gave them in 1995.

Her name is also attached to a list of 50 trading rules that circulates all over the internet. I translated this list into German years ago together with Gaby Boutaud. While preparing this English edition, I checked where the list comes from. The answer is clear and comes from Raschke herself: the rules are a compilation of classic trading wisdom that was handed to her, not rules she wrote.

In this article you get her career with sourced facts, the 50 rules sorted by theme, her best-known setups from Street Smarts and an honest view of what a rulebook like this can do. The FAQ at the end answers the most common questions about her. This article follows our editorial policy. It is for education, not investment advice, and past results do not predict future returns.

Linda Raschke in 30 seconds

• In the market since 1981: Raschke started as a market maker in equity options and was a member of the Pacific Coast Stock Exchange and the Philadelphia Stock Exchange.
• CTA from 1992 to 2015: she registered as a Commodity Trading Advisor in 1992 and launched her own hedge fund in 2002. In 2015 she retired as CTA and pool operator and now trades only her own account.
• A ranked track record: according to her official biography, her fund ranked 17th out of 4,500 for the best five-year performance in the BarclayHedge database.
• Two books, two purposes: Street Smarts (1995, with Laurence A. Connors) contains the setups, Trading Sardines (2019) tells her story.
• The 50 rules are not hers: by her own account, a senior trader collected them from classic trading literature and gave them to her on the floor in 1984.
• Honored in 2024: the International Federation of Technical Analysts gave her its Lifetime Achievement Award.

Who is Linda Bradford Raschke?

Linda Bradford Raschke is an American futures and options trader who has traded professionally since 1981 and became internationally known through Jack Schwager’s book The New Market Wizards (1992).

She learned the business on the exchange floor. In 1981 she began making markets in options, first at the Pacific Coast Stock Exchange and then at the Philadelphia Stock Exchange. A market maker quotes buy and sell prices all day and earns the spread in between. This school still shows in her style: many small positions, short holding periods and reacting instead of predicting.

In 1992 she registered as a Commodity Trading Advisor, a professional who may manage client money in the futures markets. Her firm is the LBRGroup. In the following years she was principal trader for several hedge funds, and in 2002 she launched her own fund, for which she was also the Commodity Pool Operator. A 2006 article in SFO magazine names her as principal trader of the Granat Fund.

Her official biography reports one ranking: her fund placed 17th out of 4,500 for the best five-year performance in the BarclayHedge database. The biography does not give the period or the annual return, so I do not quote a percentage here. The ranking is reported in her official biography; I could not check the underlying BarclayHedge table myself.

In 2015 she closed the institutional chapter. She gave up her roles as CTA and CPO and has traded only her own capital since then. According to her profile at the CMT Association, she still trades daily the same program she has traded since 1992.

Raschke has also served the profession. She sat on the board of the Market Technicians Association, today the CMT Association, and was a two-term president of the American Association of Professional Technical Analysts. In 2024 the International Federation of Technical Analysts gave her its Lifetime Achievement Award. If you want to know more about the traders Schwager interviewed, read our overview of the Market Wizards books.

The 50 trading rules: a classic compilation, not her own words

The list known as “Linda Raschke’s 50 trading rules” was not written by Linda Raschke. In her own introduction to the list, she writes that it was “given to me while on the trading floor in 1984”. A senior trader had collected the rules from classic trading literature of the twentieth century. Raschke passed the list on because she found it well edited and timeless.

You can prove the old origin with two of the rules. Rule 40 (“a loss never bothers me after I take it”) is a sentence from Reminiscences of a Stock Operator, the 1923 book by Edwin Lefèvre about Jesse Livermore. Rule 42, which warns against selling winners while keeping losers, condenses another passage of the same book. Both are written in the first person of a stock speculator from the early 1900s.

The confusion started when websites dropped her introduction. In 2009, for example, the stock trader Olivier Tischendorf published the list under the headline “Linda Bradford Raschke: 50 Time Tested Classic Stock Trading Rules”, and from there it spread. The word “classic” in that title is the honest part. So when you read the rules below, read them as the collected wisdom of generations of traders that Raschke found worth keeping.

I do not reproduce the 50 rules word for word here, but sum them up by theme with their numbers. The original wording is in Raschke’s own Time Tested Classic Trading Rules on TradersLog. My suggestion: read the full list once and mark the three rules you broke most recently. That is more useful than learning all 50 by heart.

Theme	Rule numbers	Core idea
Planning	1, 2, 5, 8, 18, 21, 50	trade a plan, keep records
Risk	11, 12, 13, 23, 35, 36	stops, size, no averaging down
Losses	16, 22, 29, 31, 40, 42, 48, 49	take them early, learn, move on
Profits	20, 30, 47	protect open profits
Self-control	3, 4, 9, 10, 14, 15, 17, 24 to 28, 38, 41, 45	discipline beats talent
Market behavior	6, 7, 19, 32 to 34, 37, 39, 43, 44, 46	react, do not predict

Sources: rule numbers as in Raschke’s list on TradersLog; grouping by Karsten Kagels.

Planning: trade the plan, keep the records

• Rules 1 and 21: plan your trades and follow the plan. You need a program, you must know it, and you must stick to it.
• Rule 2: keep records of your results. How to set this up is in our guide to the trading journal.
• Rules 5 and 8: keep raising your goals, and study the markets at fixed, planned times.
• Rule 18: discipline means following a set of rules you defined in advance.
• Rule 50: absorb the rules that fit you. The list itself says you should not copy all 50 blindly.

Risk: stops, size and no averaging down

• Rules 11 to 13: limit losses with stops, place the stop at the moment you open the trade, and never cancel it afterwards.
• Rule 23: split your profits in half and never put more than 50% of them at risk again.
• Rule 35: avoid large positions that control your emotions. Let your equity grow steadily, not in bursts. How to calculate the right size is in our guide to position sizing.
• Rule 36: never add to a losing position.

Losses: take them early and move on

• Rules 16 and 22: losses teach more than profits. Expect them and accept them calmly, because brooding makes you miss the next opportunity.
• Rules 29 and 31: treat a defeat as a step toward success. You cannot change yesterday.
• Rules 40 and 42: the Livermore lines. A loss you have taken does no harm; a loss you refuse to take damages account and mind. Closing winners while keeping losers is one of the worst mistakes.
• Rules 48 and 49: when the ship starts to sink, jump instead of hoping. Lose your opinion, not your money.

Profits: protect what the market gave you

• Rule 20: never let a big winner turn into a loser. Exit when the market has taken back 20% of your peak open profit.
• Rule 30: forget a loss quickly and a profit even faster, so ego and greed do not cloud your thinking.
• Rule 47: except in unusual cases, get used to taking profits early, and do not torment yourself when a trade runs on without you.

Self-control: discipline beats talent

• Rules 3, 4 and 10: keep a positive attitude, do not take the market home, and work on patience and persistence.
• Rules 9, 27 and 41: keep away from other people’s opinions, do not talk about your success, and never give unasked advice.
• Rules 14 and 15: never enter out of impatience, and do not trade in and out too often.
• Rules 17, 24 and 25: the hardest task is self-control, not prediction. Know your stress point. Winners differ from losers in discipline more than in talent.
• Rules 26, 28 and 38: in trading, as in fencing, there are the quick and the dead. Think big, and believe in your judgment.
• Rule 45: if you do not know who you are, the markets are an expensive place to find out.

Market behavior: react, do not predict

• Rules 6 and 7: successful traders buy into bad news, sell into good news, and are not afraid to buy high or sell low.
• Rule 19: a bear market can take back in one month what a bull market built in three.
• Rules 32 to 34: subordinate your will to the market. A trade is easier to open than to close. If the market does not do what you expected, get out.
• Rules 37 and 39: do not try to pick tops or bottoms, and do not guess the next big move in a narrow, sideways market.
• Rules 43, 44 and 46: standing aside is a position. Watch how the market reacts to news, not the news itself. Nobody knows the future, so react to what does happen.

Raschke’s own setups: Holy Grail, Turtle Soup and more

The rules above tell you how to behave, but not when to buy. Raschke’s own work is in Street Smarts, the book she published with Laurence A. Connors in 1995. According to the publisher, it describes 20 strategies in 25 chapters, among them Turtle Soup, Turtle Soup Plus One, 80-20s, Momentum Pinball, The “Anti”, the Holy Grail and the ADX Gapper.

One chapter even builds on another trader in this series. Chapter 20 is called “Historical Volatility Meets Toby Crabel” and applies the range contraction research of Toby Crabel. Most setups in the book are built for swing trades of one to a few days. How that holding period works in general is explained in our guide to swing trading.

Holy Grail: a pullback in a strong trend

The Holy Grail setup buys a pullback to the 20-period exponential moving average while the 14-period ADX shows a strong trend.

Raschke described the buy rules herself in an interview with the AIQ Opening Bell newsletter in August 1997. The 14-period ADX must first be above 30 and rising. Then you wait for a pullback to the 20-period EMA. When price touches the average, you place a buy stop above the high of the previous bar. Once filled, the stop goes under the newly formed swing low and is trailed as the profit grows. Sell signals work the other way round.

The ADX measures trend strength, not direction. A reading above 30 says there is enough momentum in the market for a pullback to be bought. In a 2004 interview with Active Trader magazine, Raschke showed a Holy Grail trade on the S&P 500 from December 2003: the ADX pushed above 30 on December 18, and on December 19 price pulled back to the 20-day EMA, which gave the entry.

Turtle Soup: trading the failed breakout

Turtle Soup trades a failed break of a 20-day high or low in the opposite direction.

The name is a jab at a famous group of traders. In the 1980s Richard Dennis and William Eckhardt taught a group of beginners to buy breakouts above the 20-day high. You can read their system in our guide to Turtle trading. Trend following lives with many small false signals to catch the few big trends. Connors and Raschke turned this around and trade exactly the false signals that cost the Turtles money.

As the book’s buy rules are usually summarized, today must make a new 20-day low, and the previous 20-day low must be at least four trading days old. Once the market falls below that earlier low, a buy stop goes 5 to 10 ticks above it, good for that day only. If it is filled, the protective stop goes one tick below today’s low. In the variant Turtle Soup Plus One, the earlier low must be at least three sessions old, the new low must close at or below it, and the entry comes the next day at the earlier low, which makes the trade easier to plan.

80-20s: the day that closes at its extreme

The 80-20 setup looks for a day that opened in the top 20% of its range and closed in the bottom 20%, then buys a reversal the next day.

The idea is a failed follow-through. After such a weak close, the next session must first trade below the previous day’s low, as a guideline by about 5 to 15 ticks, with the daily range measured without the night session. If price then comes back up through that low, a buy stop at the previous low triggers the entry, with the stop near the new low of the day. Short trades work the other way round. It is a day trading pattern and is usually closed the same day.

Momentum Pinball and the Anti

Momentum Pinball uses a very short RSI to decide the direction for the next day and the first trading hour as the trigger.

The filter is a 3-period RSI of the daily net price change, today’s close minus yesterday’s close, not a percentage rate of change. If it is below 30, the trader looks for a long trade the next day and buys a break above the high of the first hour. If it is above 70, the trader sells a break below the low of the first hour. The position is usually held overnight, so this is a short swing trade, not a scalp.

The “Anti” is a retracement pattern that uses a stochastic indicator. The slow line shows an established trend, the fast line pulls back toward it and then hooks back in the direction of the trend. That hook is the entry, with a tight stop. The idea is to catch the second leg of a move after weak hands were shaken out in the pullback.

The 3-10 oscillator: her everyday tool

Raschke’s best-known indicator is the 3-10 oscillator, which she told Active Trader she has used since 1981. It is the difference between a 3-day and a 10-day simple moving average, plus a signal line, a 16-period simple average of the 3-10 line. On a chart you can build it from a standard MACD by switching to simple averages with the settings 3, 10 and 16.

She uses it to read momentum and exhaustion. New momentum highs confirm a trend setup, and divergences at the end of a price run warn that a swing is ending. She described her first big winning trade, in soybeans in the early 1990s, as a buy divergence on the 3-10 oscillator, after 11 years of trading without such a home run.

What the 50 rules can do and where they stop

A list of 50 points reads quickly and rarely changes anything. It becomes useful when you hold it against your own trade records as a checklist. So here is my assessment in both directions, keeping in mind that these are classic rules Raschke passed on, not her trading method.

Strengths of the list

• Tested by time: the rules come from more than a century of trading literature, and an experienced trader like Raschke still found them worth keeping.
• Complete coverage: planning, stop discipline, position size, handling losses and market behavior are all in one list. Most rule collections cover only one of these areas.
• Market neutral: no rule is tied to a specific instrument. They apply to futures as much as to stocks or currencies.
• Partly measurable: points like the 20% limit on open profits or the ban on cancelling a stop can be checked clearly after the fact.

Limits of the list

• No entry signal: none of the 50 rules tells you when to buy. You need your own method, and the list does not replace it.
• Partly contradictory: rule 47 says take profits early, rule 20 keeps you in the trade until 20% of the peak profit is gone. Both only make sense together with a clear time horizon.
• Written for active traders: read literally, “don’t take the market home” fits day trading better than holding positions for weeks. Read as a mental rule, it fits everyone.
• Sayings are not instructions: lines like “lose your opinion, not your money” are easy to remember, but you cannot execute them in a live trade. They only work after you turn them into your own concrete rules.

If you want to use the list systematically, connect it with a number. Take your journal of the last 30 trades and mark for each trade which rule number you broke. If one number keeps coming back, you do not have a knowledge problem but a gap in your risk management. For other traders whose rules and results are documented, see our overview of the best traders in the world.

Conclusion: why this list still holds up

I translated the list years ago and still read it regularly, and the reason is rule 17: the hardest task is not prediction, but self-control. In my own trade reviews, the expensive mistakes almost never come from a wrong analysis. They come from a cancelled stop, a position that was too large or an entry out of impatience. Those three cases are rules 12, 35 and 14 in the list.

Knowing that the rules are a compilation does not make them weaker. It makes them more credible. They were not invented for a book or a course. They are lessons that generations of traders paid for, collected by a floor trader and passed on by Raschke. What the list cannot do is replace a trading method. If you have no setup yet, 50 sayings will not make you profitable. If you have a working setup and still lose money, you will very likely find the cause in this list. That makes it a diagnostic tool, not a beginner’s course.

One more thing about Raschke impresses me. She gave up the institutional business in 2015 and kept trading her own account. Being able to step back when nothing is on fire is a skill of its own, and it fits rule 43: standing aside is a position. For the books behind many of these lessons, see our selection of the best trading books.

Frequently asked questions about Linda Raschke

Who is Linda Bradford Raschke?

Linda Bradford Raschke is an American futures and options trader. She has traded professionally since 1981, first as a market maker in equity options, and became known through her interview in Jack Schwager’s The New Market Wizards (1992). She co-wrote Street Smarts with Laurence A. Connors.

Are the 50 trading rules really Linda Raschke’s rules?

No, they are a compilation she passed on. In her own introduction to the list, Raschke writes that a senior trader gave it to her on the trading floor in 1984 and that he had collected the rules from classic trading literature. At least two rules come from Reminiscences of a Stock Operator (1923).

Which books has Linda Raschke written?

She has written two books. Street Smarts (1995, with Laurence A. Connors) describes short-term setups such as Turtle Soup, the Holy Grail and Momentum Pinball. Trading Sardines (Daughters Press, 2019) is a personal account of her career with many lessons from the markets, not a system book.

What is the Turtle Soup strategy?

Turtle Soup trades a failed breakout of a 20-day high or low in the opposite direction. If the market makes a new 20-day low but quickly comes back above the previous low, the setup buys. The name refers to the Turtle traders, who bought exactly such breakouts.

What is Linda Raschke’s Holy Grail setup?

The Holy Grail buys a pullback to the 20-period EMA while the 14-period ADX is above 30 and rising. The entry is a buy stop above the high of the previous bar after price touches the average. The stop goes under the new swing low and is trailed as the trade moves.

Does Linda Raschke still trade?

Yes, but only for her own account. In 2015 she retired as a Commodity Trading Advisor and Commodity Pool Operator and no longer manages client money. According to the CMT Association, she still trades daily the same program she has used since 1992.

What is Linda Raschke’s net worth?

There is no reliable figure. Raschke has never disclosed her private wealth, and estimates on the internet rest on no verifiable source. What is documented is the fund ranking: according to her official biography, her fund placed 17th out of 4,500 for the best five-year performance at BarclayHedge.