Market Wizard Linda Bradford Raschke

In Jack Schwager’s interview with Linda Raschke from The New Market Wizards, we once again seen a trader who has a very different system than I do. Raschke prefers to trade very short term options, rarely holding a position for more than a week. While that short term approach doesn’t fit my personality, and options trading is still a bit advanced for me, it is interesting to see that some of the same truths still apply despite the different approaches.

Top Five Quotes From Market Wizard Linda Raschke:

“The truth is that once you get down on the trading floor, you find that the traders come from all walks of life. You don’t have to be a rocket scientist to be a trader. In fact, some of the best traders whom I knew down on the floor were surf bums. Formal education didn’t really seem to have much to do with a person’s skill as a trader.” – Linda Raschke

This is a thought that we have seen over and over again from various Market Wizards. Some of them feel that there is a minimum intelligence required to be successful and anything more is unnecessary, while others completely disregard intelligence as a contributor to success. I think that one has to have a certain level of intelligence in order to develop an interest in trading, but after that, I can see why they don’t overvalue intelligence.

Most of the Market Wizards have discussed that things like discipline and diligence are actually far more important that intelligence. Having a strong sense of discipline when it comes to research and homework can do wonders to make up for any intelligence a trader may lack.

“I’m also a firm believer in predicting price direction, but not magnitude. I don’t set price targets. I get out when the market action tells me it’s time to get out, rather than based on any consideration of how far the price has gone. You have to be willing to take what the market gives you.” Linda Raschke

This sounds like something Livermore would say. I feel that this also runs parallel to my views on trading. I have always held the view that I have no idea what the market will do tomorrow, so the best I can do is put as many odds in my favor as possible and roll the dice. Setting price targets would contradict this belief.

“I really value the fact that I’ve learned to trade as a craft. Like any craft, such as piano playing, perfection may be elusive – I’ll never play a piece perfectly, and I’ll never buy the low and sell the high –  but consistency is achievable if you practice day in and day out.” – Linda Raschke

I found Raschke’s comparison to playing piano very interesting. While I had never thought of trading in this respect, the similarities are very interesting. The concept of always being a work in progress and never being perfect really appeal to my emotional makeup. I love the idea of constantly working to get better with no defined finish line in place.

“I truly feel that I could give away all my secrets and it wouldn’t make any difference. Most people can’t control their emotions or follow a system. Also, most traders wouldn’t follow my system, even if I gave them step-by-step instructions, because my approach wouldn’t feel right to them.” – Linda Raschke

This is another concept we have seen from other Market Wizards, and I believe it is the key concept of the entire series. The idea is that the system a trader uses is one of the least important things contributing to a trader’s success. It is far more important to have the discipline to stick to a system, the understanding of how and why a system works, and the psychology to cut losses and ride winners. It seems that any trader can find a system that suits his personality and then apply these concepts to be successful, but these concepts are the reason for success, not the system.

“Understand that learning the market can take years. Immerse yourself in the world of trading and give up everything else. Get as close to other successful traders as you can. Consider working for one for free.” – Linda Raschke

There are three great lessons in this quote. The first is Raschke’s reminder that learning to trade is a long term endeavor. I am planning to spend the next fifty or so years trading, so taking a few years to really analyze my approach is rather insignificant in that frame of reference.

The second lesson is that in order to really learn the markets, you have to dive in head first and really make it your life’s work. You have to be passionate about it. If it’s just a hobby, then it will always be just a hobby. 

The last part is about getting yourself surrounded by successful traders. This was probably a lot more difficult to do in the early 90s when this interview took place. Today, we have technology like Twitter that allows anyone just getting started to ask questions or advice to extremely successful traders. I have developed contacts and even friendships with many successful traders over the past year and have found most of them to be extremely helpful in my development.