Linda Raschke is one of the most respected names in short-term technical trading, known for a career built on disciplined, rules-based decision-making rather than prediction or forecasting. Her body of work — distilled over decades of live trading — offers a set of observations about how markets actually behave, not how traders wish they would behave.
At Above the Green Line, we find her framework valuable because it echoes our own core philosophy: react to what the market is doing, not to what you think it should do next. Below, we walk through her key observations, grouped by theme, along with why each one matters to a rules-based trader.
Reading Intraday Reversals
Raschke placed heavy emphasis on when a reversal happens, not just that it happens. Her observation was that genuine trend reversals are far more likely to show up in the morning session than in the afternoon — meaning a trader watching for a change in direction should weight early-session signals more heavily than late-day ones.
She also highlighted a specific, repeatable pattern: after a fresh high is made, the first pullback that follows tends to offer a higher-probability buying opportunity than chasing the breakout itself. The mirror image holds on the downside — the first bounce after a fresh low is often a better selling opportunity than shorting into new-low weakness directly.
Gaps, Follow-Through, and the Power of the Close
A recurring theme in her work is that strength or weakness late in one session tends to carry into the next. If a market closes strong in the afternoon, that strength often shows up again the following day — and the same logic applies to weak closes. She viewed the size of an opening gap similarly: the larger the gap, the higher the odds the market is signaling a genuine trend day rather than a one-off move that fades.
High volume into the close reinforces this idea further — a heavy-volume close in one direction tends to set up follow-through the next morning in that same direction.
The Previous Day’s High and Low as Pivot Points
Raschke treated the prior session’s high and low as genuinely meaningful reference points — not arbitrary lines, but the actual price levels where real buying or selling pressure showed up the day before. Watching how the market behaves around these levels — does it test and reject them, or does it push through with conviction — gives a trader a real-time read on whether the current session is technically strong or weak.
The Last Hour Tells the Truth
One of her most quoted observations: the final hour of trading often reveals what large, informed participants are actually doing, since institutional positioning tends to get finalized as the session winds down. In a market already showing a strong trend, she looked for that trend to reassert itself specifically in the last hour — a sign the move has real conviction behind it, rather than being an intraday head-fake.
She similarly flagged a specific warning sign for uptrends: a strong morning rally followed by a weak close is often the tell that an uptrend is running out of steam, even if the day’s overall range still looks bullish on the surface.
The First Hour Sets the Tone
Raschke observed that the opening hour of trading tends to establish the framework for the rest of the day — and noted that, over time, a larger share of a session’s total range has come to occur in that opening window. Her practical takeaway: when the early tape shows strong signs of a trending day, it pays to act on that information aggressively rather than waiting for confirmation later on.
Four Enduring Principles of Price Behavior
Beyond these intraday observations, Raschke pointed to four broader principles she considered foundational to almost any trading approach with a genuine statistical edge — concepts she traced back to the early writings of Charles Dow:
- A trend is more likely to continue than to reverse.
- Momentum tends to shift before price does — momentum often leads, price follows.
- Trends tend to end in a climax, not a quiet fade.
- Markets alternate between periods of range expansion and range contraction — quiet, tight ranges tend to resolve into wider, more volatile ones, and vice versa.
Her view was that nearly every trading system or pattern with a real, lasting edge is really just a specific expression of one of these four underlying truths.
The Core Philosophy Behind It All
Perhaps Raschke’s most important lesson isn’t a rule at all — it’s a mindset. She was direct about the limits of forecasting: no one can reliably predict what a market will do next. The traders who succeed over the long run aren’t the ones who guess correctly more often; they’re the ones who build a disciplined process for reacting to what the market actually does, rather than betting on what they expect it to do.
That distinction — reacting versus predicting — sits at the heart of how we approach markets at Above the Green Line as well. Rules-based, systematic, and grounded in what price is actually telling us, not what we hope it will tell us next.
Raschke’s emphasis on reacting to price rather than predicting it fits naturally within a broader Investment Strategy Guide, which outlines the core principles behind building a disciplined, rules-based approach to the markets.
This article draws on the trading principles popularized by Linda Raschke. For the original source material, see Varchev Finance’s summary of Linda Raschke’s 12 technical trading rules.