What Is the Know Sure Thing (KST)?
Let me tell you about the Know Sure Thing, or KST. It's a momentum oscillator that Martin Pring developed to simplify how traders interpret rate-of-change readings.
Key Takeaways
You need to know that the KST focuses on interpreting rate-of-change price data as a momentum oscillator. Signals come from the KST crossing its signal line, and you should watch for overbought or oversold levels. I recommend combining it with other technical analysis to boost your trading success.
Calculating the Know Sure Thing (KST)
To calculate the KST, you take the simple moving average of four different rate-of-change periods, sum them up to get the KST, and then create a signal line with a 9-period SMA of that KST value.
The equation for KST is: KST = (RCMA #1 × 1) + (RCMA #2 × 2) + (RCMA #3 × 3) + (RCMA #4 × 4), where RCMA #1 is the 10-period SMA of 10-period ROC, RCMA #2 is the 10-period SMA of 15-period ROC, RCMA #3 is the 10-period SMA of 20-period ROC, and RCMA #4 is the 15-period SMA of 30-period ROC.
After that, you calculate the signal line as the 9-period SMA of the KST.
Understanding the Know Sure Thing (KST)
You can use the KST like other momentum oscillators, such as the RSI. Look for trading signals when it crosses the signal line, or check for convergence and divergence with price, overbought or oversold states, or centerline crossovers.
I suggest combining the KST with other technical analysis methods to increase your chances of success. For instance, incorporate non-momentum indicators, chart patterns, or candlestick patterns into your decisions.
Fast Fact
In a 1992 Stocks and Commodities article, Pring called this indicator the 'Summed Rate of Change (KST)', but the KST name is what stuck with technical analysts.
Example of the Know Sure Thing (KST)
Consider this example chart: the KST hit highly overbought levels in early February and then crossed over, creating a timely sell signal. It also crossed in late February, mid-March, and mid-April with varying results, but you should focus on both overbought or oversold conditions plus the crossover for signals.
You might also examine other technical elements to improve trades. On the chart, note the heavy bearish volume on the signal day or the candlestick patterns before it—these can help you decide and avoid weaker KST suggestions.
