I keep it pretty simple and just trade the ES/NQ Spread.

The only reason for that is I feel a little more comfortable with it and I know that the NQ is a Riskier
Asset Class than say the Dow or Russell can be at times. So they’re can be a greater movement and
chance for larger profits. Flip side there can be losses as well of course. The biggest challenge however
at least this year is the weighting of APPL which has at times made it difficult. If AAPL ever gets moved to
the DOW I think this will trade much better, but I have been able to make a few decent trades doing
this. Another reason for the spread is that the margin is much less than being Naked Long or Naked
Short as well as the fact you are hedged to a certain extent. Plus with a smaller size account I can
potentially get a higher return on whatever margin I do use.

The greatest way to generate profits from this is by legging into or out of your entries/exits on both ends
of the spread. At least that’s what I seem to gather. That being said I’m not good enough to pick the
tops and the bottoms. I’m still working on that probably will for the rest of my trading life! Therefore I
just put the spread on altogether for now and trade it as appropriate. So if I feel the mkt direction could
go one way or another I can easily swing Risk on or off if I can catch a trend (this chop range we’ve had
really doesn’t help) then I can catch some good pt action overall. I’ve had spread trades that have lasted
me 40m to catch a nice move and some that lasted over 1 month +.

The way I look at the spread form is:

Risk On : Long (2) NQ & Short (1) ES

Conversely

Risk Off: Short (2) NQ & Long (1) ES

You maybe asking why 2 NQ’s and only 1 ES, this is bc of the tick value’s. You have to get them as close
as possible. Since NQ trades at $5 per tick and ES trades $12.50 you need 2 NQ contracts to get as close
as possible.

In TOS I believe there is a spread trader or they use a diff formula “((/NQ*2*20)-(/ES*50))/20”, but
pretty much the same concept. I use IB so here is what it looks like for me:
IB is a horrible platform to chart the spread, so I use NinjaTrader. I’ve written a custom script which
calculates the spread for me. TOS will automatically do it for you so there shouldn’t be any problem. I
basically just trade this off of the 15m chart and the daily chart.

Red line is 5 EMA

Green line is 34 EMA

Blueish line is the actual Spread

15m

Daily
As far as the when to go long or short I keep it pretty simple no matter if it’s a scalp or a swing trade for
a large move.

When the 5EMA crosses below the 34 EMA you short (Risk Off). Conversely if the 5 crosses above the
34EMA you go long the Spread (Risk On). On the daily I will just add Fib retraces of the spread to get
levels as well as using standard support and resistance to see where to get in and out. I’ve tried adding
RSI/Stochastics etc..but it hasn’t seemed to help me yet so I reverted back to keeping these simple rules
until I can refine it better.

As an fyi :

1 Spread – so 2 NQ’s/1 ES = $20 per pt so on a large up or down day 20pts would be $400. If you can
time the entries of legging in and out it could be greater.

Hope this helps a little if you have any comments, questions, concerns even constructive criticism I am
always open to learning!