Re: Oscillator & Histogram indicator(s) - cTrader

2
KST


The Know Sure Thing (KST) is an oscillator developed by Martin J. Pring as the “Summed Rate of Change (KST)” in a 1992 article in Stocks & Commodities magazine.

Know Sure Thing (KST) is a Momentum oscillator based on the Smoothed Rate of Change (ROC) for Four different Time frames, gives Bullish and Bearish momentum signals.
Each time period is Smoothed using a Moving Average. Also, each time period is weighted differently depending on length, so a longer time period would have greater weight. Because of the consideration of the Various time periods, the KST is able to react more quickly to price moves.

It can be used just like any Momentum oscillator. Chartists can look for Divergences, Overbought / Oversold readings, Signal line crossovers and Centerline crossovers. Pring frequently applied trend lines to KST.
Although Trend line signals do not occur often, Pring notes that such breaks reinforce Signal line crossovers.

One thing to Note, is that the time frames used in the indicator's parameters is at the trader's discretion.
Pring recommended that when switching between Daily, Weekly and Monthly charts ; the parameters of the indicator should be switched accordingly.

For example :
Daily (10, 15, 20, 30, 10, 10, 10, 15, 9)
Weekly (10, 13, 15, 20, 10, 13, 15, 20, 9)
Monthly (9, 12, 18, 24, 6, 6, 6, 9, 9)


A Two lines indicator used determine momentum in Stock trends. As an oscillator it fluctuates above and below zero, providing trade signals and analytical insight based on divergence with price and KST and Signal Line crossovers. The indicator formula utilizes Four different Time frames to show overall Momentum, and not just Momentum over One specific Time frame :

ROCMA1 = 10-Period SMA of 10-Period Rate-of-Change
ROCMA2 = 10-Period SMA of 15-Period Rate-of-Change
ROCMA3 = 10-Period SMA of 20-Period Rate-of-Change
ROCMA4 = 15-Period SMA of 30-Period Rate-of-Change

KST Line = (RoCMA1 x 1) + (RoCMA2 x 2) + (RoCMA3 x 3) + (RoCMA4 x 4)

Signal Line = 9-period SMA of KST

Where SMA stands for Simple Moving Average and ROC stands for Rate-of-Change.

Even though the formula for KST looks complicated, it is a rather straightforward indicator. It is simply a Weighted Average of Four different rate-of-change values that have been Smoothed. For example, calculate the 10-period Rate of Change (ROC) and then Smooth it with a 10-period Simple Moving Average.



The Chart below shows the Four different rate-of-change indicators with the appropriate Moving Averages (MA) for Smoothing.



Watch for Bullish and Bearish momentum signals in the KST indicator.
When the KST turns Upward, this is a Bullish signal, and when the KST turns Down, this is a Bearish signal.
More confirmation is given when the trigger line crosses the KST line as a result of the change in direction.

There are Two lines : the Trigger line and the KST line.
The KST line is a result of the Four moving averages smoothed as well as the Rate of Change or ROC. The Trigger line is a Moving Average of the KST.

Buy / Sell Signals
- A Buy signal occurs when the KST line is below the 0 line and crosses from below the Trigger line to above the Trigger line.
- A sell signal occurs when the KST line above the 0 line and crosses from above the Trigger line to below the Trigger line.

Divergence
Divergence occurs when Price Action or Movements is not confirmed by the indicator's readings.
This can be a sign that the current, underlying momentum does not support price and a reversal is potentially at hand.
- Bullish KST Divergence is when prices is falling but KST is rising.
- Bearish KST Divergence is when price is rising but KST is falling.

Overbought / Oversold
-Overbought and Oversold conditions are somewhat more difficult to define in regards to the KST.
The reason is that unlike other momentum oscillators (such as the RSI), KST is not bound to a Specific range.
Therefore, defining true Overbought and Oversold levels with take some research and experimentation. Historical analysis can assist in the process. Most of the time, KST overbought and oversold conditions are good for trend confirmation and not necessarily reversals. Overbought can be seen as a sign of strength during a Bullish market, while oversold may be a sign of strength in a Bearish market,
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