Know Sure Thing (KST)
Candlefocus EditorThe KST is created by combining five different moving averages, each with a different look-back period and smoothing rate, which is then compare against the smoothed rate of price change. Specifically, the KST is calculated by taking the 10-period RoC of the most recent closing price, the 15-period RoC of the closing price 26 days ago, the 20-period RoC of the closing price 52 days ago, the 30-period RoC of the closing price 78 days ago and the 45-period RoC of the closing price 105 days ago, and then subtracting the 15-period RoC of the closing price 78 days ago using the following formula: KST = ( (10 X Current RoC) + (15 X 9-bars ago RoC) + (20 X 19-bars ago RoC) + (30 X 29-bars ago RoC) + (45 X 44-bars ago RoC))- (15 X 29-bars ago RoC).
The KST also includes a signal line, which is a 9-period moving average of the KST, intended to smooth out the oscillator’s readings. When the KST crosses over its signal line, or when it enters or exits overbought or oversold territory, it’s usually considered an indication that a trading opportunity is present. In addition, traders often look for divergences between the KST and price action, as well as combine it with other technical indicators such as relative strength index (RSI) in order to create more accurate signals.
Overall, the KST is a powerful momentum oscillator used to identify potential trading opportunities. While the KST is a completely self-contained tool, traders will often incorporate it with other indicators in order to increase the accuracy of their trading signals.