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KST( Know sure thing ) indicator in stock market

Posted By Analyst On 6/14/2009 03:03:00 PM Under ,

1. To be a perfect stock market analyst one must study the KST( Know sure thing ) indicator which helps one to perform remarkably as it has a high success rate in the stock market.

1. KST( Know sure thing ) indicator has its origin in 1990 and one can learn about this indicator in detail in the book by Martin Pring who is the originator of this indicator in his book "Technical Analysis Explained". The KST indicator is an oscillator designed to identify market turns based on the existence of these time cycles.

2. The concept behind the oscillator is that price trends are determined by the interaction of many different time cycles and that important trend reversals take place when a number of price trends are simultaneously changing direction.The concept behind the oscillator is that price trends are determined by the interaction of many different time cycles and that important trend reversals take place when a number of price trends are simultaneously changing direction.

3. The formula is as follows:

ROC1 = (1-Price/Price(X1))*100;
ROC2 = (1-Price/Price(X2))*100;
ROC3 = (1-Price/Price(X3))*100;
ROC4 = (1-Price/Price(X4))*100;

Where Price refers to current closing price and Price(X1) refers to the closing price X1 bars ago.

KST = MOV(ROC1,AVG1)*W1 + MOV(ROC2,AVG2)*W2 + MOV(ROC3,AVG3)*W3 + MOV(ROC4,AVG4)*W4

Where MOV(ROC1,AVG1) refers to the AVG1 day moving average for ROC1

For Short term trend, Martin J Pring suggest the following parameters:

X1 = 10
X2 = 15
X3 = 20
X4 = 30

AVG1 = 10
AVG2 = 10
AVG3 = 10
AVG4 = 15

W1 = 1
W2 = 2
W3 = 3
W4 = 4

4. Entry rules KST Indicator
(a) When KST crosses below its 8 day exponential average, short at the next day opening price

Exit rules KST Indicator 
(b) . When KST crosses above its 8 day exponential average, close short position at the next day opening price.

5. The dominant time frame in the Know Sure Thing (KST)'s construction is a 24-month period, which is half of the 4-year business cycle. This means that the Know Sure Thing (KST) will work best when the security in question is experiencing a primary up- and downtrend based on the business cycle.

6.It is possible to program all KST formula into MetaStock charting software.
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