KST oscillator

Key takeaways

KST oscillator belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect KST oscillator to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of KST oscillator from memory before moving on to harder problems.

Reference excerpt

In financial technical analysis, the know sure thing (KST) oscillator is a complex, smoothed price velocity indicator developed by Martin J. Pring. A rate of change (ROC) indicator is the foundation of KST indicator. KST indicator is useful to identify major stock market cycle junctures because its formula is weighed to be more greatly influenced by the longer and more dominant time spans, in order to better reflect the primary swings of stock market cycle. 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.

Formula Four different rates of change are calculated, smoothed, multiplied by weights and then summed to form one indicator.

R O C 1 = ( P r i c e / P r i c e ( X 1 ) − 1 ) ∗ 100 ; {\displaystyle ROC1=(Price/Price(X1)-1)*100;}

R O C 2 = ( P r i c e / P r i c e ( X 2 ) − 1 ) ∗ 100 ; {\displaystyle ROC2=(Price/Price(X2)-1)*100;}

R O C 3 = ( P r i c e / P r i c e ( X 3 ) − 1 ) ∗ 100 ; {\displaystyle ROC3=(Price/Price(X3)-1)*100;}

R O C 4 = ( P r i c e / P r i c e ( X 4 ) − 1 ) ∗ 100 ; {\displaystyle ROC4=(Price/Price(X4)-1)*100;}

http://search.cpan.org/~kmx/Finance-TA-v0.4.1/TA.pod#TA_ROC_(Rate_of_change_:_((price/prevPrice)-1)*100) Where price refers to current closing price and price(X1) refers to the closing price X1 bars ago.

K S T = M O V ( R O C 1 , A V G 1 ) ∗ W 1 + M O V ( R O C 2 , A V G 2 ) ∗ W 2 + M O V ( R O C 3 , A V G 3 ) ∗ W 3 + M O V ( R O C 4 , A V G 4 ) ∗ W 4 {\displaystyle 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 trends, Martin J Pring suggests 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 The formula is built into, or can be included in, various technical analysis software packages such as MetaStock or OmniTrader.

Implications

Entry rules KST Indicator When KST crosses below its 9-day exponential average, short at the next day opening price.

Exit rules KST indicator When KST crosses above its 9-day exponential average, close short position at the next day opening.

Variations It can be calculated on daily or long term basis. The dominant time frame in the (KST)'s construction is a 24-month period, which is half of the 4-year business cycle. This means that the KST will work best when the security in question is experiencing a primary up- and downtrend based on the business cycle.

KST interpretation KST can be interpreted in the ways mentioned below. 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.

Directional changes and moving average crossovers The average to use is a simple 10-day moving average. It is possible to anticipate a moving average crossover if the KST has already turned and the price violates a trendline. The KST started to reverse to the downside before the up trendline was violated. Since either a reversal or a trading range follow a valid trendline violation, it's evident that upside momentum has temporarily dissipated, causing the KST to cross below its moving average. Traditionally, the MACD gives buy and sell signals when it crosses above and below its exponential moving average, known as the “signal line”. This approach isn't perfect; the ellipses on the chart highlight all the whipsaws. As said earlier, the KST can also give false or misleading signals, as you can see from the April 2005 buy signal. It comes close to a couple of whipsaws, but by and large, it's more accurate, even though the MACD often turns faster than the KST.

Overbought/oversold and divergences The concept is that when the indicator crosses above and below the overbought/oversold zones, momentum buy and sell signals are triggered. Even so, you must wait for some kind of trend reversal signal in the price, such as a price pattern completion, trendline violation, or similar. The KST often diverges positively and negatively with the price.

Trendline violations and price pattern completions It is possible to construct a trendline on the KST and see when it's been violated, but not very often. When it does though, it usually results in a powerful signal.

Worked examples

Example 1 — a first encounter with KST oscillator

Start with the simplest possible case. Write down what KST oscillator claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to KST oscillator before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about KST oscillator ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of KST oscillator

In research: KST oscillator appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses KST oscillator in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: KST oscillator is common in secondary-school and first-year university syllabi. It links to neighbouring topics Technical indicators, so understanding it makes those chapters shorter.
In everyday life: Look for KST oscillator outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

How to study KST oscillator in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what KST oscillator means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain KST oscillator out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is KST oscillator in simple terms?

In financial technical analysis, the know sure thing (KST) oscillator is a complex, smoothed price velocity indicator developed by Martin J. Pring.

Why does KST oscillator matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study KST oscillator?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on KST oscillator.