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Indicator: KST indicator with Forumla, Strategy, Advantages and Limitations - Trading Worker
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KST (Know Sure Thing)

The Know Sure Thing (KST) is a momentum oscillator developed by Martin Pring that is based on the smoothed rate-of-change of four different price cycles. It helps identify major trend reversals and overbought/oversold conditions by measuring price momentum across multiple timeframes.

Formula

RCMA1 = 10-period SMA of 10-period ROC
RCMA2 = 10-period SMA of 15-period ROC
RCMA3 = 10-period SMA of 20-period ROC
RCMA4 = 15-period SMA of 30-period ROC
KST = (RCMA1 × 1) + (RCMA2 × 2) + (RCMA3 × 3) + (RCMA4 × 4)
Signal Line = 9-period SMA of KST
Where:
ROC = Rate of Change
SMA = Simple Moving Average

How KST Works

The KST combines four different price cycles to create a comprehensive momentum indicator. Each cycle is weighted differently, with longer-term cycles having more influence on the final calculation. The indicator generates signals through crossovers with its signal line and centerline, as well as through divergences with price action. When KST rises, it indicates increasing momentum, while a falling KST suggests decreasing momentum.

Trading Strategies Using KST

Strategy Examples

  • Trade KST/Signal line crossovers
  • Look for centerline crossovers
  • Monitor bullish/bearish divergences
  • Use KST extremes for overbought/oversold signals
  • Combine with price action for confirmation

Support and Resistance Strategy

  • Use KST levels as dynamic support/resistance
  • Look for historical KST reversal points
  • Monitor KST convergence at key price levels
  • Use multiple timeframe KST for level confirmation
  • Watch for KST reactions at extreme levels

Trend Identification

  • Uptrend: KST above signal line and rising
  • Downtrend: KST below signal line and falling
  • Trend strength: Distance from centerline
  • Trend reversal: KST/Signal line crossover
  • Trend confirmation: Multiple timeframe alignment

Advantages and Limitations

Advantages

  • Combines multiple timeframes for comprehensive analysis
  • Provides clear trend signals through crossovers
  • Effective at identifying major trend reversals
  • Less prone to whipsaws than simpler momentum indicators

Limitations

  • Can lag behind price due to multiple smoothing periods
  • Complex calculation may be difficult to understand
  • May generate false signals in choppy markets
  • Requires confirmation from other indicators

Best Practices When Using KST

  • Use multiple timeframes to confirm KST signals
  • Combine with volume analysis for stronger validation
  • Wait for clear KST/Signal line crossovers before taking positions
  • Monitor centerline crossovers for trend confirmation
  • Use KST divergences with price for additional confirmation
  • Consider market conditions when interpreting KST signals
  • Look for confluence between KST and other momentum indicators
  • Backtest different KST parameter settings
  • Document which KST patterns work best for your trading style
  • Regularly review and optimize your KST-based strategies