Thursday, May 19, 2022
HomeTechnical AnalysisHow to trade using KST (Know Sure thing)

How to trade using KST (Know Sure thing)

The Know Sure Thing (KST) is a momentum oscillator developed by Martin Pring in 1992.

This is calculated by adding the simple moving average of four different rate of change periods (ROC)
and is getting added together to come up with the KST.

The KST indicator is a two-line indicator.
It consists of the KST line (GREEN) and a signal line (RED)which is an SMA of the KST line itself.

KST
KST

KST=(RCMA $1×1)+(RCMA $2×2) + KST=(RCMA $3×3)+(RCMA $4×4)

where:
1. RCMA $1=10-period SMA of 10-period ROC
2. RCMA $2=10-period SMA of 15-period ROC
3. RCMA $3=10-period SMA of 20-period ROC
4. RCMA $4=15-period SMA of 30-period ROC

Its value fluctuates above and below zero.
The default setting of the KST indicator is KST (10, 15, 20, 30, 10, 10, 10, 15, 9).

Points to remember:

  • The KST Indicator is a two-line indicator similar to MACD.
  • A buy signal is generated when the KST crosses above the zero line or makes a crossover above its signal line.
  • If the KST crosses below (the zero) line or makes a crossover below the signal line, a sell signal is initiated.
  • The “KST-signal” line is calculated based on the 9-period Simple Moving Average of the “KST” Indicator.
  • The default setting of the KST indicator is KST (10, 15, 20, 30, 10, 10, 10, 15, 9).
    If prices are falling and the KST indicator is rising, this is a bullish divergence.
  • If the stock price is rising while the KST indicator is falling, it is considerably a bearish divergence.
  • The KST indicator can also be an effective tool for intraday traders.
  • The indicator is prone to giving false signals like any other trading tool so always better to use along with other Tech indicators like RSI , Volume etc.
  • The KST along with the volume indicator (like OBV) is one of the effective ways of knowing and validating trends.

    How to trade using KST?

Following are the ways in which traders use the KST indicator for making trades.

Bullish Signals

  • When the zero line cross happens in the upward direction.
  • When there is a bullish divergence between price and KST indicator.
  • Also, when the KST line is negative and crosses above the signal line.

Bearish Signals

  • When the zero line cross happens in the downward direction.
  • When there is a bearish divergence between price and KST indicator.
  • Also, when the KST line is positive and crosses below the signal line.

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