MetaTrader5
Understanding the Know Sure Thing (KST) Indicator for MT5 Trading
The Know Sure Thing (KST) indicator is a powerful oscillator that traders use to gauge momentum through the Rate of Change (ROC). It combines four different-period ROCs, all smoothed out using simple moving averages (SMAs). The result is a final value that oscillates above and below a zero line, giving you insight into market momentum. The indicator's signal line is simply the SMA of the KST line, which means it's effectively measuring the momentum across four distinct price cycles.
Developed by Martin Pring and introduced in 1992 in Stocks & Commodities Magazine, the KST indicator has remained a go-to tool for traders worldwide.
How is KST Calculated?
The default calculation periods for the ROC, smoothing, and signal line are as follows: 10, 15, 20, 30, 10, 10, 10, 10, 10, 15, 9.
ROCMA1 = SMA(ROC(10), 10)
ROCMA2 = SMA(ROC(15), 10)
ROCMA3 = SMA(ROC(20), 10)
ROCMA4 = SMA(ROC(30), 15)
KST = ROCMA1 + (ROCMA2 * 2) + (ROCMA3 * 3) + (ROCMA4 * 4)
Signal = SMA(KST, 9)
In essence, KST takes the rate of price change for four different time periods, smooths them out, and summarizes the results.
Interpreting KST: What You Need to Know
General Rule: When KST is positive, it indicates rising momentum, suggesting a bullish market. Conversely, when KST is negative, momentum is falling, pointing to a bearish market.
It's important to note that the calculation and smoothing periods can be adjusted based on your trading preferences. Pring recommended the following parameter values for different chart types:
D1: (10, 15, 20, 30, 10, 10, 10, 15, 9)
W1: (10, 13, 15, 20, 10, 13, 15, 20, 9)
MN: (9, 12, 18, 24, 6, 6, 6, 9, 9)
Divergences: What to Watch For
Divergence occurs when the price movement doesn't align with the indicator values. This mismatch can signal a potential market reversal. For instance, a bullish divergence happens when prices are dropping while KST is climbing. On the flip side, bearish divergence occurs when prices are rising and KST is falling.
Overbought and Oversold Conditions
Unlike other oscillators, KST isn't bound to specific ranges, making it essential to conduct your research to identify true overbought and oversold levels. Generally, these conditions can confirm a trend rather than indicate a reversal. Overbought conditions may suggest strength in a bull market, while oversold levels can indicate strength in a bear market.
Crossovers: Key Signals
When analyzing KST, there are two types of crossovers to consider:
Zero line crossover
Signal line crossover
Zero line crossovers often lag and may not be very reliable, typically indicating a trend continuation. On the other hand, signal line crossovers can reveal significant changes in momentum. For example:
If the KST line crosses the signal line from below while in negative territory, it indicates increasing upside momentum. Conversely, if the KST line crosses the signal line from above while in positive territory, it suggests increasing downside momentum.
The Know Sure Thing (KST) indicator has its strengths and weaknesses, just like any other technical analysis tool. It shouldn't be used in isolation but rather as part of a broader trading strategy. While it can be delayed due to its moving average components, its ability to confirm trends through overbought and oversold conditions makes it a valuable asset when used alongside other indicators.
2025.04.17
