Raschke Swing Trading
The original trading strategy was developed by Linda Bradford Raschke, who is one of the most famous female traders in the world. Raschke is a trader and, accordingly, is trading on a small timeframe. Her trading style is characterized above all by the fact that she uses clearly formulated strategies, in which the initial risk is kept as small as possible. This is exactly where the benefit of this strategy is. You have predetermined stop level with calculated risk and really good chance of high rewards.
First of all, please let me explain a little bit about this strategy.
Entry signals are generated in strong trend movements, whenever a retracement on the exponentially weighted 20s GD (EMA) has taken place. The trend strength is measured with the ADX indicator. The stronger a trend, the higher the value of the ADX. The strategy assumes an ADX of more than 30. The strategy works with immediate loss limitation over an initial stop loss. Immediately after opening the position, the trade is hedged via a stop loss on the swing-low.
Rules for opening a long position (and vice versa for a short position)
- First, the strength of the trend must be determined. The 14-day ADX must have a value of more than 30 for a strong trend, and the strategy can be applied. The indicator does this calculation on its own. As far as the moving average's color changed we have an ADX condition above 30.
- The minimum requirement for price retracement is determined by an exponentially weighted 20-day average. As soon as the price touches the exponential 20-day GD, a stop buy order is placed just above the high of the last trading day. The indicator draws a horizontal line at this point. Alternatively, on the next trading day, a stop buy order is placed on the top of the bar that touches the 20-day GD for the first time, if you like to trade in D1 timeframe.
- Immediately after the stop buy order has been executed, a stop loss order will be placed under the newly formed swing low for position hedging. The indicator shows this line, too.
- If the trade is stopped, a new stop buy order is placed on the original entry course.
- The take profit with half the position is when the market reaches a new swing high. Depending on whether the trend makes a strong impression, the other half can be sold or held immediately.
The strength of the signal is the excellent chance-risk ratio to test the entry into strong intraday trends. Due to the initial stop rate, the risk is limited to a few points. If a strong trend continues to unfold, there is a profit that is many times higher than the risk. Keep in mind to trade with the trend always. You should add some SMAs (50/100/200) to determine the overall direction. Do not enter trades, when there is an unclear situation.
The indicator gives you the possibility to choose the settings on your own preferences. But keep in mind, that there is a clearly setup made by Linda Raschke. But never mind, you can play around with the settings like the MA-Period or the ADX level. The standard settings are the original ones.
- ADX: Period - Enter the period of the ADX indicator you would like to have.
- ADX: Level - Enter the level of the ADX indicator you would to get informed about, when the price hits it.
- MA: Period - Enter your preferred moving average period.
- MA: Method - Enter your preferred moving average method (simple, exponential etc.).
- MA: Applied Price - Enter you settings, on which to count the moving average (close, open etc.).
- History Bars Limit - Enter the bars you would like to back-check for the analysis
- Alert-Settings - Enter which alerts you would like to have. Mobile/Email/Popup ware available.