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Know Sure Thing (KST) Oscillator

Know Sure Thing (KST) Oscillator

 

Implication


A bullish signal is generated when the KST, "Know Sure Thing", rises above its moving average. When the KST falls below its moving average, the Technical Analysis is a bearish signal.
Supported "Short-term KST" events are suitable for investors interested in a time frame of 2-6 weeks. "Intermediate-term KST" events are suitable for those interested in 6-39 week trends. Supported "Long-term KST" events are suitable for a 9-month to 2-year time frame.

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Description


Price at any one time is determined by the interaction of many different time spans. Normally oscillators are constructed from a single time span so they ignore cycles not related to that specific period. The KST, on the other hand, consists of four different periods that are combined into one oscillator. Each time span used in the KST is smoothed with a moving average. Weightings are given to each moving average according to the length of the time span. Longer periods have greater weight in order to bring out a smoother curve. The KST changes direction sooner in response to price moves than similar oscillators using one time span because of the inclusion of shorter time spans.


The KST can be interpreted in the same way as other smoothed oscillators but most commonly indicates bullish and bearish momentum signals as it crosses above and below its moving average respectively. Because of the leading characteristics of this oscillator, it is important to make sure that some kind of trend confirmation is given by the price itself. This could be a price pattern breakout, trendline violation or moving average crossover.


Three time frames are supported (short-term, intermediate-term and long-term), however the KST can be calculated for trends of any other term. For more information on the relationship between these trends please visit http://www.pring.com/ksttheory.htm. For educational movies on the KST and other technical concepts please visit http://www.pring.com/movies.htm. Further information on the KST can be found in the book "Technical Analysis Explained" by Martin J. Pring.

Know Sure Thing (KST) Oscillator

 

Note that Intermediate-term KST events from this service are recognized at the end of the week in which the crossover was found. For example, the event date is always on a Friday even if the crossover occurred in the middle of the week. Similarly, Long-term KST events are recognized at the end of the month in which the crossover occurred, therefore the event date is always the end of the month even if the crossover occurred mid-month.

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Trading Considerations


The KST usually moves in a deliberate path which means that changes in direction offer bullish and bearish momentum signals. When the KST turns upward this indicates a bullish situation. When it turns downward, a bearish situation is likely. This service recognizes events when the KST crosses its moving average, which indicates a more distinct change in direction. This is the more reliable approach to interpreting the KST. However the investor may look for earlier signals by watching for changes in the direction of the KST before a crossover might occur; in particular the investor may watch for the KST converging with its moving average to anticipate a crossover earlier.


Usually it is better to delay trading decisions until the price confirms the situation implied by the KST. This confirmation might be a trendline violation, price pattern breakout or moving average crossover.
Overbought and oversold reversals have a higher degree of reliability than reversals that take place near the equilibrium level. The magnitude of KST fluctuations will depend on the volatility of the price and the type of trend being measured. This means that overbought/oversold levels are determined on a trial and error basis with reference to the oscillator's past history.


Divergences (when market trends go in a different direction than market indicators predicted, usually signifying the onset of a trend change) occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the KST. Prices usually correct and move in the direction of the KST.