Know Sure Thing Indicator (KST) is a momentum oscillator based on the smoothed rate-of-change for four different time frames. Martin Pring, the author of Complete Guide to Technical Analysis An Indian Perspective, developed the indicator. Pring referred to this indicator as to the “Summed Rate of Change (KST)”. KST measures price momentum for four different price cycles. You can use the KST indicator just like any momentum oscillator.
Interpreting Know Sure Thing Indicator
You can use the Know Sure Thing indicator in the same way as many other momentum oscillators, like the popular relative strength index (RSI). Trading signals are originated once the KST crosses over the signal line. But traders may also look for convergence and divergence along with with the price, overbought or oversold conditions, or crossovers of the centerline.
Lots of traders combine the KST indicator along with other forms of technical analysis to maximize their odds of success. For instance, traders may look at other non-momentum indicators, chart patterns, or candlestick patterns to help in their decision-making.
Attaching the Know Sure Thing Indicator (KST)
The Know Sure Thing (KST) indicator is available for traders under the STUDIES section in the Zerodha Kite browser app. The KST indicator is also available in the Kite mobile App. The default field is close and we can set the field open, high, low, or close, etc. The Lightest rate of Change is 10 and the Heaviest rate of Change is 30.
The lightest SMA period and heavy SMA period are 10 by default. The signal period is 9 and we can also change the parameters of the SMA in the different time frames. Please check the image below to understand how we attached the KST indicator to the HDFC Bank Share Price Chart.
Apart from the above example of Zerodha Kite, here is Upstox Pro. The strategy is quite simple and straightforward. First login your account, then open any of your preferable charts. After that, the open indicator section puts the name of the indicator. And, click on the application.
Important Points of the Know Sure Thing Indicator
- KST is also a momentum oscillator that is based on the smoothed rate of change over 4 separate time frames.
- Martin Pring designed it to capture four different price cycles.
- One can use the indicator like other unbound momentum oscillators, such as the MACD.
- The Percentage Price Oscillator, and TRIX which is closely resembled KST.
- But this Know Sure Thing indicator is not well suited for identifying overbought and oversold conditions as it is unbound.
- Martin Pring, the creator, favored signal line crossovers and trendline breaks for signals.
Trading Strategies with Know Sure Thing
- In the KST indicator, the trend line signals do not occur so often, that such breaks reinforce signal line crossovers, noticed by Pring.
- Know Sure Thing indicator is generally rising when above its signal line and oppositely falls when below its signal line.
- A rising negative Know Sure Thing (KST) line determines that downside momentum is in a warning.
- In the same way, a falling and positive KST line determines that upside momentum is fading.
- Let’s move towards a little more advanced strategy. Here, I’ve added a Moving Average along with the indicator. Once the price crosses the MA from below and goes above. At the same time, if KST crosses the Zero lines from below, take a buy. Oppositely, book profit or short-sell when the price crosses the MA from above and KST crosses the Zero line and goes below.
How Marting Pring Traded the Know Sure Thing Indicator?
- Pring frequently applied trend lines to KST. In the Know Sure Thing indicator, the trend line signals do not occur often, and such breaks reinforce signal line crossovers, Pring noticed this.
- Know Sure Thing is generally rising when above its signal line and falls when below its signal line.
- A rising and negative Know Sure Thing (KST) line indicates that downside momentum is in a warning.
- Similarly, a falling and positive KST line indicates that upside momentum is fading.
Features of Know Sure Thing Indicator
- The Know Sure Thing (KST) Indicator is a two-line indicator almost similar to the MACD.
- A buy signal is originated once the Know Sure Thing crosses above the zero lines or makes a crossover above its signal line.
- When the KST crosses below the zero lines or makes a crossover below the signal line a sell or short sell signal is generated.
- The KST Indicator signal line is calculated based on the 9-period Simple MA of the KST Indicator.
- The default setting of the particular indicator is KST (10, 15, 20, 30, 10, 10, 10, 15, 9).
- When prices are falling and the KST indicator is rising, it is a bullish divergence.
- And, if the stock price is rising while the KST indicator is falling, then it is a bearish divergence.
- The KST indicator may be an effective technical tool for intraday traders.
- As the indicator is prone to giving false signals like any other trading tool, it is advisable to use other indicators along with it.
- The indicator along with the volume indicator is one of the most effective ways of knowing and validating trends.
FAQ
The Know Sure Thing (KST) indicator is a momentum oscillator used to identify powerful trends and reversals in stock prices. It uses four different timeframes, which help investors recognize changes in long-term and short-term trends.
Traders typically use KST to find potential buy or sell signals by observing crossover points between key levels, such as zero lines, divergences between the price and KST indicator, or other related peaks or troughs. It’s important for traders to be mindful of risk thresholds when trading with KST since it works best when conditions are right.
Short Term KST consists of three separate moving averages with slightly different lengths (10, 6 & 4). This type of calculation allows investors to differentiate between the longer horizons that would occur using only one moving average combination versus being able to identify shorter cycles that might cause sharp swing motions in a security’s price action.
While both Momentum Oscillators measure momentum on financial charts, there are some key differences between the Moving Average Convergence Divergence (MACD) Indicator and the Know Sure Thing Indicator (KST). Unlike MACD which only takes into account 12-day exponential moving averages combining two concepts together – trend following plus momentum – the Know Sure Thing looks at different intervals from 10 days up to 90 days depending upon investor preference. Measuring multiple intervals at once will allow users more insight into deeper underlying trends versus relying solely upon 12 months of data fluctuations.
Conclusion
Just like all momentum series, Know Sure Thing signals might be confirmed by some kind of trend reversal confirmation from the series it is monitoring. So, after all, we are buying as well as selling the price, not the momentum. The price occasionally experiences a linear trend that does not conveniently fall into the usual business cycle rhythm.