The full name of the KST indicator is Know Sure Thing, which was developed by Martin Pring (Martin Pring), and some Chinese are also translated as "Know Sure Thing". KST is a momentum oscillator that is calculated based on the smoothed Rate of Change on 4 different time frames. In 1992, Mr. Pringle described the indicator as "Summed Rate of Change" for the first time in the "Stocks and Commodities Futures" magazine. In simple terms, the KST indicator measures price momentum on 4 different time frames before combining them into a single momentum oscillator.
Like other unconstrained oscillators, technical analysts can use the KST to look for divergences, as well as crossing the horizontal midline or crossing the signal line to generate trade signals. Readers who are familiar with Pringer's analysis ideas should know very well that he likes to draw trend lines on KST indicators very much. Although trendline signals do not appear often, Mr. Pringle pointed out that KST breaking the trendline will strengthen the previous KST crossing of the signal line, so that traders are fully alert to possible changes in the trend.
So how to use the KST indicator?
First of all, the KST indicator will fluctuate up and down around the midline 0 axis. At the most basic level, price momentum favors bulls when the KST indicator is positive, and favors bears when the KST indicator is negative. At the same time, a positive KST reading also means that the weighted and smoothed ROC is mostly positive, and the market as a whole is rising. Conversely, a negative KST reading means that the market as a whole is falling.
Secondly, technical analysts can also observe the overall price trend through the intersection of the KST indicator line and the signal line. If KST is above its signal line, KST itself usually rises. Conversely, if KST is below its signal line, KST itself will often fall. A negative but rising KST reading indicates a weakening downtrend, while a positive but declining KST reading warns of a previous uptrend.
Again, although KST may generate many different signals, only KST crossing the midline 0 axis and KST crossing the signal line are more reliable. Unlike many other oscillators such as RSI, KST readings have no upper and lower boundaries, so overbought/oversold techniques do not apply.
Martin Pringer was the first to admit that the KST indicator is not perfect. But KST is still very useful. Mr. Pringle encourages technical analysts to experiment with various parameter settings, since one setting does not fit all situations. For example, stocks in industries such as utilities and consumer staples tend to be less volatile, and KST parameters should be set more sensitively. And for some volatile tech stocks, desensitization may be necessary.
At the same time, Martin Pringer also endorsed the practice of adjusting the weight of the rate of change. However, it is difficult to obtain a final consensus on this adjustment, and further in-depth research is needed.
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