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The KST indicator or the Know Sure Thing indicator is a technical analysis tool developed in the early 1990's by Martin Pring. It weights several smoothed rate of change time-series with different periods.
The KST indicator was developed in order to signal and to detect market trends while removing shorter-term movements.
To detect short-term trends, Marting Pring used a (10, 15, 20 and 30) periods for the rate of change, (10, 10, 10 and 15) periods for the simple moving average used to smooth the different rate of change and (1, 2, 3 and 5) period as weights when summing the preceding smoothed time-series.
Traders buy a security/stock when its KST crosses above its signal line, which is the 8-bar exponential moving average of the Know Sure Thing indicator. They go short when the KST crosses below its signal line.
KST must not be flat or near the zero line, otherwise the security or stock is considered to be trending and signals generated by the KST are unreliable.
KST in a trading system:
- Buy at the next day opening price when KST is trending and KST crosses above its signal line (8-bar exponential moving average)
- Short at the next day opening price when KST is trending and KST crosses below its signal line
- Sell at the next day opening price when KST crosses below its signal line
- Cover at the next day opening price when KST crosses above its signal line
How to plot the KST indicator in QuantShare:
k = kst();
Plot(k,"Know Sure Thing",colorBlue,chartLine,styleOwnScale);
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
