He made MILLIONS using only the MACD: Strategy revealed

Linda Raschke is a legend in the world of trading. With a career that includes working for several hedge funds and founding her own fund in 2002, she has amassed millions using a strategy based solely on the MACD.

In this article I discuss their innovative approach and how you can apply it to your own operations.

Article summary

Linda Raschke uses MACD in an unconventional way.
Their strategy, called 'Anti Setup', looks for reversal points in trends.
Change the default MACD settings to suit your method.
The strategy is applicable to all markets and time frames.

The 'Anti Setup' strategy

Linda's strategy, known as 'Anti Setup', focuses on identifying reversal points in a trend during a significant pullback. The goal is to capitalize on the massive move that follows this pullback.

To better understand, imagine a downward movement that begins to correct. When the price starts to move in the opposite direction, a pullback is formed.

Linda uses the MACD to identify these specific moments and follows a set of rules that allow her to find perfect entries for her trades (as you can see, you don't have to be a genius or have taken many investment courses to do what Linda does).

What is MACD?

The MACD is a momentum indicator that shows the relationship between two exponential moving averages (EMAs) of a financial asset's price. These two EMAs are subtracted to obtain the MACD line, and then a signal line is drawn, which is an EMA of the MACD line.

How is MACD used?

Traders use the MACD to:

Identifying trends: When the MACD line crosses above the signal line, this may indicate an upward trend. When the MACD line crosses below the signal line, it may indicate a downward trend.
Measuring momentum: The distance between the MACD lines and the signal line can indicate the strength of a trend.
Detecting divergences: When the price of an asset moves in one direction and the MACD moves in the opposite direction, this can be a sign of divergence, suggesting a possible trend reversal.

How does Linda Raschke use MACD?

Linda uses the MACD in an unconventional way, and with a very particular configuration.

MACD configuration

To implement Linda's strategy, you first need to configure the MACD on your trading platform. Here's how Linda does it:

Access TradingView (or your preferred trading platform).
Add the MACD indicator to your chart.
Change the settings:
- Quick length: 3
- Slow length: 10
- MACD Length: 16
- Turn off the histogram.
- Average type: Simple.
Customize the colors for greater clarity: MACD line in red and signal line in yellow.

With this setup, you'll be ready to start looking for trading opportunities.

Rules for entering into a transaction

Linda follows a specific set of rules to identify her transactions:

New MACD high: The MACD line must surpass its previous high.
Signal line direction: The signal line should move in the direction of the operation you wish to perform (upwards for long operations).
MACD line reversal: The MACD line should return to the signal line, and both should move in opposite directions, indicating indecision in the market.

Once these conditions are met, set your stop loss just below the recent low and your take profit at the previous high (Linda didn't tell us this, but it's what we traders assume).

Practical example

Since this strategy can be difficult to understand without a practical example, I've decided to include a video explaining it, which you can watch here:

Apply this strategy step by step with a secure broker

If you're going to test this strategy, it's best to do so through a regulated and secure broker. Don't risk it with a broker with questionable credentials, as you could lose your money.

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Investment type: Portfolio planning and long-term investing.

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Try Linda's strategy on XTB

How to use stop-loss orders to protect your capital like a professional trader

Stop-loss orders are essential trading tools that allow traders to limit their losses and protect their profits. However, many traders make the mistake of setting stop-loss orders that are too tight, which can result in being kicked out of a trade due to market volatility.

Strategies for setting stops according to Linda

Use wide stops.
Implement a time stop (a time stop is an order that is triggered after a certain period of time, regardless of the asset's price movement).

How to place stop-loss orders

Many traders tend to place their stop-loss orders below a previous low, which is a common practice. However, Linda suggests using the lower Keltner channel as a consistent method for setting an initial stop-loss order.
This provides a greater probability that the operation will succeed without being affected by market noise.

Relationship between target size and success rate

An interesting finding is that the lower the profit target, the higher the success rate.
For example, if you aim for a profit of just three ticks, your success rate could be 90%. However, if you aim for five ticks, this rate could drop to 60%. Makes sense.

The mindset of correcting mistakes

Linda Raschke shares her mantra: 'admit mistakes and correct them immediately'. This approach has allowed her to salvage many trades that would otherwise have resulted in significant losses. She mentions that, in her experience, approximately 90% of trades that are not corrected in time end in losses.

The importance of acting quickly

One of the most important lessons Linda Raschke emphasizes is that you shouldn't let a mistake become a bigger problem. Instead of averaging down, which is a common trap, it's better to exit the trade and think clearly. This not only helps minimize losses but also allows you to stay calm and focused.

As you can see, this is just another aspect of risk management.

My personal opinion

I honestly think it could be interesting to test this strategy, but don't think that with a simple strategy you will become a trader.

The truth is, I don't think Linda's greatest merit lies in her use of the MACD. From my perspective, her true merit lies in the risk management she implemented, something she doesn't discuss very openly. But I've come to this conclusion after years of trading.

The truth is, if your goal is to make money trading, you'll have no choice but to get some training. But don't forget that while trading is an exciting option, it's not the only way to make money in the market. Long-term investing in ETFs can also be an excellent strategy, depending on your investor profile.

However, if you want to be a trader, I encourage you to take a look at my ranking of trading courses.

Final Considerations

In short, the proper use of stop-loss orders can make the difference between success and failure in trading. As you've seen, Linda's strategy isn't complex at all, and yet it has earned her millions.

The key, as I said before, lies in risk management and not so much in the MACD, but this is just my opinion.

I hope you enjoyed the article, and if you want to continue reading stories of traders who have become millionaires, I invite you to read the story of Takeshi Kotegawa, one of the most successful day traders in Japan.

Norberto Viale( Trader and founder of Experiencia Topstep )

My name is Norberto. I've been investing and trading for over a decade. I'm also the author of the trading course Experiencia Topstep. If you want to learn how to invest and have any questions, feel free to contact me.