Jack Schwager Premium Indicators

Introduction and Overview

An introduction and overview of the Jack Schwager indicators, with examples and explanations of use.

Watch this video before any others.

Trend Weight Indicator

The Trend Weight (TW) indicator is designed to capture major trends in the market. The value of the indicator reflects the strength of the trend and can range between -100 (most bearish) to +100 (most bullish). TW threshold levels specified by the user can be used to generate buy and sell signals. Based on the empirical evidence, the TW can also be used as a filter to determine which side of a market to trade from. (Based on the performance analysis of a broadly diversified futures portfolio across 25 years, on balance, positions in line with the TW had substantial positive performance, while positions in conflict with the TW would have experienced the exact opposite outcome.)

Overbought Oversold Indicator

The Overbought/Oversold (OBOS) indicator is a counter-trend measure, which becomes increasingly positive (overbought) as an uptrend progresses and increasingly negative (oversold) as a downtrend progresses. The indicator has a range between -100 and +100. Extreme values in the OBOS can be viewed as an indication that the trend may be overextended and prone to reversal. Such extreme readings in the OBOS can be used as signals to employ a sensitive exit condition (e.g., using a relatively close sell stop if long and indicator is at very high positive values). The OBOS can also be used as a trend signal in that shifts from negative to low positive readings tend to lead to upside extensions, and shifts from positive to low negative readings tend to lead to downside extensions.

Directional Weight Indicator

The Directional Weight (DW) combines the TW and OBOS into a single composite indicator, which can range between -100 and +100. The DW is equal to the TW minus the OBOS. The typical pattern for a major uptrend will be that, initially, the DW will increase as the trend develops, reflecting an increasing TW and a little changed OBOS. Subsequently, as the trend extends further, the DW will begin to decline, as the TW will be near maximum readings, while the OBOS increases with the extension of the uptrend. It is not uncommon for the DW to retrace back to near zero by the time the market is at a top. The pattern for a major downtrend would be analogous. Similar to the TW, user-specified threshold levels for the DW can be used to generate buy and sell signals, and the DW can also be used as a filter to determine which side of a market to trade from.

Dual Trend Indicator

The Dual Trend (DT) indicator combines the Trend Weight (TW) with the TradeShark Long Trend Difference (LTD) indicator. The DT is inherently diversified, as the TW is a long-term indicator, while the LTD is a much shorter-term indicator. The DT can be set in one of two modes:

  • Single Condition—A bullish reading in one indicator (with the other neutral) is sufficient for a trade signal.
  • Dual Condition—Both indicators need to be in a bullish mode to signal a long position, and both need to be in bearish mode to signal a short position.

Nine Ways to Use the Trend Weight and Directional Weight Indicators

Watch Jack Schwager illustrate nine different approaches to using the trend weight. It should be noted that the same approaches would apply to the directional weight, as well. There are a couple of differences between the two. At the end of the video, we'll note the exceptions which apply to the directional weight, but we will only review the examples for the trend weight. We will use the same market, specifically the Australian dollar for the past two years, to illustrate each of the approaches and to compare them to each other.

Using Jack Schwager Indicators for Stocks

In this video Jack Schwager takes a look at applying the Jack Schwager Indicators to stocks. Now there are several key differences between stocks and other markets.

Creating Jack Schwager Indicator Templates

Trade Shark provides the user a great amount of flexibility in how to display price charts and indicators. This video shares with you the settings that jack uses to create the templates that were used in the video series for the Jack Schwager indicators so if  you want to use the same types of charts dont miss this great video.

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