Linda Raschke’s 12 Timeless Technical Trading Rules for Smarter Market Decisions

If you’ve been involved in trading for any length of time, you’ve likely come across the name Linda Raschke — one of the legendary “Market Wizards” featured by Jack Schwager. With decades of experience as a professional trader, Raschke distilled her vast market wisdom into a set of guiding principles that remain remarkably relevant today.

In this article, we’ll explore Linda Raschke’s 12 technical trading rules, reinterpret them for modern markets, and unpack the timeless price principles behind them. Whether you trade stocks, forex, or futures, these insights can sharpen your market intuition and refine your technical strategy.

1. Buy the First Pullback After a New High, Sell the First Rally After a New Low

Markets often move in waves. After breaking to a new high, prices typically pull back before resuming the trend. Smart traders use these early retracements to join the dominant direction with reduced risk.

Tip: Combine this rule with moving averages or trendlines to confirm momentum.

2. Afternoon Strength or Weakness Usually Follows Through the Next Day

Late-day momentum isn’t random — it often signals institutional activity. Strong buying or selling in the afternoon tends to carry over into the following session.

Trading insight: Watch the closing hour for setups that align with larger time-frame trends.

3. The Best Reversals Occur in the Morning

Morning sessions bring volatility and opportunity. The early part of the day reflects fresh market sentiment after overnight developments.

Look for: Reversal patterns or false breakouts during the first hour — they often set the tone for the rest of the day.

4. Large Market Gaps Signal Trend Continuation

While gaps can be tricky, big gaps often mean strong conviction. When markets open significantly higher or lower, it reflects decisive trader sentiment and increases the likelihood of continuation.

Pro tip: Avoid fading large gaps unless there’s a clear exhaustion signal.

5. Watch How Price Behaves Around the Previous Day’s High and Low

Yesterday’s high and low act as natural pivot points — the battlegrounds between buyers and sellers. How the market reacts to these levels reveals its underlying strength or weakness.

  • Rejection at these levels can spark reversals.
  • Breakouts with strong volume suggest continuation.

6. The Previous Day’s Highs and Lows Are Key Decision Zones

Raschke emphasizes these levels as “definitive points” where major buying or selling previously occurred. Traders should monitor whether the market:

  • Tests and reverses near these levels, or
  • Pushes through with momentum.

Understanding this dynamic helps you trade with — not against — the dominant flow.

7. The Last Hour Reveals True Market Strength

Institutional “smart money” often acts during the final hour of trading. Consistent strong closes indicate accumulation, while weak closes after morning rallies suggest exhaustion.

Rule of thumb: Sustained strong closes support ongoing uptrends.

8. Volume at the Close Predicts Next-Day Direction

A surge in closing volume signals conviction. When trading volume spikes near the close, it often implies continuation in that direction during the next session.

In trending markets, expect momentum to resume late in the day — not fade.

9. The First Hour Sets the Day’s Framework

Known as the “opening range”, the first hour defines the structure for the entire trading day. Price action here reveals key support and resistance levels and whether the market is likely to trend or consolidate.

10. Act Decisively When Early Strength Appears

In modern markets, much of the day’s range occurs in the first hour. If early signals show a strong trend developing, act quickly — hesitation often means missing the best risk-reward opportunities.

Tip: Backtest intraday breakout systems that focus on early momentum.

11. The Four Enduring Principles of Price Behavior

Linda Raschke highlighted four universal truths about price action — principles that have stood the test of time across markets and timeframes:

  1. A Trend Is More Likely to Continue Than Reverse. Trends persist because of crowd psychology and institutional positioning.
  2. Momentum Precedes Price. Shifts in momentum often occur before visible price movements — indicators like RSI or MACD can offer early clues.
  3. Trends End in a Climax. Watch for parabolic moves and extreme volume — they often signal exhaustion.
  4. Markets Alternate Between Range Expansion and Contraction. Periods of low volatility give way to breakouts, and vice versa. Recognizing these cycles is key to timing entries and exits.

12. Trade What You See — Not What You Think Will Happen

Perhaps the most profound lesson: the future is unknowable. Even the best traders can’t predict the market. Instead of speculating, successful traders react objectively to what the market is doing right now. Focus on price action, not predictions.

Final Thoughts: Timeless Wisdom in a Fast-Changing Market

Linda Raschke’s trading rules remind us that while technology and market access have evolved, human behavior remains constant. Every candlestick, every breakout, every pullback is a reflection of collective psychology — fear, greed, and conviction.

For today’s trader, mastering these timeless principles means developing discipline, adaptability, and respect for market structure. Whether you trade short-term or long-term, applying Raschke’s rules can help you stay on the right side of the trend — and that’s where profits are made.