<ul><li><p>Professional Trading Techniques </p><p>BY LINDA BRADFORD RASCHKE </p><p>www.lbrgroup.com </p><p> Copyright 1998 2012 Linda Raschke and LBRGroup, Inc. </p><p>ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the author. </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 2 </p><p>DISCLAIMER </p><p> THE TRADING OF FUTURES AND STOCKS INVOLVES RISK. IT SHOULD NOT BE ASSUMED THAT THE METHODS, TECHNIQUES, OR INDICATORS PRESENTED IN THIS MANUAL WILL BE PROFITABLE OR THAT THEY WILL NOT RESULT IN LOSSES. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. DO NOT TRADE WITH MONEY YOU CANNOT AFFORD TO LOSE. LOSSES ARE EXPECTED IN ALL TRADING SYSTEMS. </p><p>HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. RESULTS MAY HAVE OVER OR UNDER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. </p><p>PURCHASE OF THIS MANUAL CONSTITUTES YOUR AGREEMENT TO THE ABOVE DISCLAIMER AND EXEMPTS THE AUTHORS AND ANYONE ELSE INVOVLED IN THE PRODUCTION OR DISTRIBUTION OF THIS MANUAL FROM ANY LIABILITY OR LITIGATION. </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 3 </p><p>DISCLAIMER ................................... 2 </p><p>Introduction .................................... 8 </p><p>The Nature of The Game ........................... 9 </p><p>Trading With The Edge ........................... 11 </p><p>Principles of Price Behavior ........................ 12 </p><p>Principle One: A Trend Has a Higher Probability of Continuation than Reversal ....................................... 12 </p><p>Principle Two: Momentum Precedes Price ......... 12 </p><p>Principle Three: Trends End in a Climax .......... 13 </p><p>Principle Four: The Market Alternates between Range Expansion and Range Contraction! .............................. 13 </p><p>BASIC MARKET STRUCTURE ....................... 14 </p><p>Defining the Trend summary: ................ 15 </p><p>Classic Chart Formations as defined by Waves ........ 18 </p><p>Bar Chart Patterns Breakout Formations ......... 18 </p><p>Continuation Patterns - Bull and Bear Flags ........ 18 </p><p>V-Spike Climax Reversal Patterns ............... 18 </p><p>More Reading Material ....................... 19 </p><p>Technical Indicators ............................. 19 </p><p>20-PERIOD EXPONENTIAL MOVING AVERAGE ........ 19 </p><p>KELTNER CHANNELS .......................... 20 </p><p>OSCILLATORS ............................... 20 </p><p>The 3/10 OSCILLATOR ......................... 21 </p><p>THE PRICE PULSE THE MAIN PRINCIPLE BEHIND THE 3/10 OSCILLATOR 21 </p><p>TRADING PATTERNS USING THE 3/10 OSCILLATOR .... 22 </p><p>FIRST CROSS BUY/SELL ...................... 22 </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 4 </p><p>INTERMEDIATE BUY/SELL .................... 22 </p><p>3/10 ANTI ................................ 23 </p><p>10-BAR DIVERGENCE SIGNAL ................. 23 </p><p>ADX ...................................... 24 </p><p>Charts for Section 1 Basic Market Analysis .......... 26 </p><p>Charts for Section 1 Indicators .................... 42 </p><p>Tape Reading monitoring markets for confirmation and aberrations 53 </p><p>PIVOT POINTS ................................. 55 </p><p>OPENING PRICE .............................. 55 </p><p>PREVIOUS DAYS HIGH AND LOW ................. 56 </p><p>LAST HOUR HIGH AND LOW ..................... 57 </p><p>FIRST HOUR HIGH AND LOW .................... 57 </p><p>THE CLOSING HOUR .......................... 58 </p><p>Charts for Section 2 Tape Reading and Pivot Points ... 58 </p><p>SWING TRADING CONCEPTS AND TRADING STRATEGIES .. 71 </p><p>A SUMMARY OF SHORT-TERM TENDENCIES WHEN FOLLOWING A 2-3 DAY RHYTHMN .................................. 73 </p><p>TRADE EXECUTION ............................. 74 </p><p>Working size .............................. 75 </p><p>Gap Openings ............................. 75 </p><p>TRADE MANAGEMENT and EXITING A POSITION ......... 76 </p><p>STOPS ...................................... 76 </p><p>EXECUTION PROBLEMS .......................... 77 </p><p>Pulling the trigger .......................... 77 </p><p>Freezing up ............................... 77 </p><p>RISK and MONEY MANAGEMENT .................... 78 </p><p>ACCOUNT MANAGEMENT ......................... 79 </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 5 </p><p>BASIC BUSINESS PLAN........................... 79 </p><p>YOUR TRADING PROGRAM .................... 80 </p><p>COMPONENTS OF A PROGRAM ................. 81 </p><p>PUTTING TOGETHER YOUR GAME PLAN EACH DAY ... 83 </p><p>DAILY ROUTINE............................ 84 </p><p>RECORD KEEPING - ADDING STRUCTURE TO THE PLAN85 </p><p>MANAGING YOUR TRADING ................... 85 </p><p>PSYCHOLOGY ................................. 86 </p><p>CONCENTRATION .......................... 87 </p><p>PSYCHOLOGY OF WINNING ................... 87 </p><p>THE WINNING FORMULA ..................... 88 </p><p>SLUMP BUSTING ........................... 88 </p><p>STAYING IN THE GAME MENTALLY .............. 90 </p><p>MENTAL TOUGHNESS ....................... 91 </p><p>WHEN THINGS GO BAD ...................... 93 </p><p>Putting it all together ............................ 93 </p><p>Trading approach for Trader X .................... 93 </p><p>Nightly Preparation ......................... 93 </p><p>The Trading Day ........................... 94 </p><p>Using Relative Strength to augment the Trading Day . 95 </p><p>Summary .................................. 95 </p><p>Appendices ..................................... 96 </p><p>Appendix A - CONCENTRATION excerpt from Tubbs Stock Market Correspondence Lessons ..................................... 97 </p><p>Appendix B - DAYTRADING S&amp;P FUTURES - Linda Bradford Raschke 100 </p><p>Swing Trading Concepts ..................... 100 </p><p>Time-of-Day Tips .......................... 101 </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 6 </p><p>Divergences .............................. 101 </p><p>Exits ................................... 102 </p><p>Trend Days .............................. 102 </p><p>How to Limit Losses ........................ 103 </p><p>Appendix C - The Forefathers of Swing Trading Linda Raschke 104 </p><p>Appendix D - Notes from a Swing Trader - Extract from a 1993 lecture by Linda Bradford Raschke .............................. 112 </p><p>Money (and Risk) Management ................ 112 </p><p>'Reading the Tape' ......................... 113 </p><p>Overnight Positions ......................... 113 </p><p>Setting Up 'The Swing' ...................... 114 </p><p>The Rhythm of 'The Swing' ................... 115 </p><p>Higher Bottoms/Lower Tops ................... 115 </p><p>Appendix E - SWING TRADING: RULES AND PHILOSOPHY Linda Raschke 116 </p><p>Basic Rules for Swing Traders ................. 116 </p><p>'Trading the Swing' ........................ 117 </p><p>The Count ............................... 117 </p><p>Additional Considerations! .................... 118 </p><p>Practice ................................. 118 </p><p>System Characteristics ...................... 118 </p><p>Decision-Making ........................... 119 </p><p>Golden Rules ............................. 119 </p><p>Recommended reading list: ................... 119 </p><p>Appendix F - THE MENTAL ASPECT OF TRADING Linda Raschke 120 </p><p>Principles of Peak Performance ................. 121 </p><p>Master the Game .......................... 123 </p><p>Appendix G - Tape Reading - Linda Bradford Raschke ..... 124 </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 7 </p><p>Tape Reading ............................. 124 </p><p>Responses ............................... 125 </p><p>Pivot Points .............................. 126 </p><p>Appendix H - TREND DAYS Linda Raschke ........... 127 </p><p>The Principle of Range Contraction/Expansion ...... 127 </p><p>Conditions Preceding a Trend Day .............. 128 </p><p>Trading Strategies ......................... 128 </p><p>Exit Strategies ............................ 129 </p><p>Trade Management ......................... 130 </p><p>A Few Words on Volatility Breakout Systems ....... 130 </p><p>Appendix I - Time Tested Classic Trading Rules for the Modern Trader to Live By Linda Raschke ................................. 132 </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 8 </p><p>Introduction </p><p>The mastery of trading is a never-ending pursuit. Knowledge of and confidence in a workable methodology is just a departure point. Consistency in the approach and application of a particular technique will be the real key to a traders success. So, though initial market and trading theory is important, it is not until a trader attempts to put actual technique into actual practice that the real learning begins. All methods begin with the laying down of structure and rules however, these are ultimately meant to serve as guidelines. A newer trader will do best to follow these guidelines as closely as possible and in doing so, should meet with a modicum of success. As a trader develops more expertise, they will be better able to recognize when certain market conditions are changing and when rules can be given more flexibility. If a traders bottom line starts to suffer, though, they will do best to go back and follow the guidelines and rules as possible. </p><p>Self-study is just as important to successful trading as is the study of price behavior or technical analysis. A trader must maintain an even temperament, an orderly composure and a calm mind. They must have the confidence to believe in their own trading decisions without looking to outside sources for validation or confirmation. Dedication, persistence and patience are required for success and ultimately, mastery. </p><p>This in-depth manual is designed to provide you with techniques and tools to give you an edge in trading. However, those who crave success must ultimately still do their own research in order to develop their own trading process. Study the ideas presented here but then prove to yourself that they work. Keep what makes sense to you and find ways to make the material your own, for this is how it will have of most value to you. Doing your own analysis, study and research is the fastest way to build confidence in a trading process. </p><p>Though all the tools necessary to design your own trading program are contained in this manual, the time necessary to gain in experience is always the most underestimated part of the equation. Experience is applying the trading process in a consistent fashion until it becomes ingrained in your trading personality and is part of your routine. Understanding the next most probable play needs to become second nature. The ability to then act on this information is the goal. Cumulative successful results are achieved by following this process on a daily basis. As with any performance-oriented discipline, you must enjoy the day to day process that makes up the journey if you are to be successful. </p><p>Read this manual several times and review the concepts on a regular basis. The ideas presented here will take on more meaning as your experience grows. And as you gain in experience, your confidence and success will also grow. </p><p>I wish you success in your quest to improve your trading performance and excel in your niche in the markets. There is no substitute for hard work, patience and perseverance. In my own case, my initial failures provided the foundation for an eventual climb to success in trading. In fact, we are all ever climbing and would like for you to join in experiencing the satisfaction of a job well done. Trade well and prosper! </p><p> Co</p><p>pyrig</p><p>ht 19</p><p>98 </p><p>2012</p><p> Lind</p><p>a Ras</p><p>chke</p><p> and L</p><p>BRGr</p><p>oup, </p><p>Inc.</p></li><li><p> 9 </p><p>The Nature of The Game </p><p>The markets are a personal journey and every trader is destined to learn market truths for themselves. The learning curve is as much about figuring out what doesnt work as it is discovering which things work best for you. Each individual has a different personality and thus a slightly different approach to the market. However, a trader is less apt to experience a setback if he accepts some basic fundamental truths as to the nature of the game. </p><p>First, though principles of price behavior remain the same, the game is always changing in subtle ways. Relationships that we take for granted can change. New technology has speeded up information flows and changed the execution process. New market products continue to be created. So, it is important to maintain an open mind to the fact that there are a myriad of possibilities that we may not be able to see at the time </p><p>Second, the key to longevity in this business is first and foremost capital preservation. Have the patience to wait for clear, well-defined trade setups. The majority of trades result in small w..</p></li></ul>