The Know Sure Thing is a momentum indicator developed by the investment advisor Martin Pring. It shows the difference between the currency’s closing price for the current day and the closing price of the same currency two days ago.
This indicator can be used in the same manner as the other momentum indicators like RSI and Stochastic. KST indicator essentially measures the price momentum of four different cycles and combines them into a single momentum oscillator. Traders typically use this indicator to look for signal line crossovers, divergences and centerline crossovers.
Traders combine trend lines with this indicator to generate potential trading signals. Trend line signals do not often occur in the market, but when they do, this indicator produces accurate buy/sell signals.
Know Sure Thing indicator can be used on all the timeframes as it identifies the short term and long term trends. It is recommended to pair this indicator with other technical tools such as the momentum and non-momentum indicators, price action and candlestick patterns to make their trading decisions. When the KST goes above the signal line (zero-line), it means that the market is in a bullish trend and when it goes below the signal line, it means that the momentum is bearish in the market.
Installing ‘KST Indicator’ in MT4 (step – by – step process)
By default, the KST Indicator is not available in the MT4 Terminal, but it is available on the internet. Follow the link below to download the same.
Download the zip file from the link and extract the file. Paste it to your MT4 directory/MQL4.
Make sure to paste it in the ‘Indicators’ folder
Restart your MT4 Terminal.
Click on the Insert > Indicator > Custom > KST Indicator
As you can see in the image below, we have applied the KST indicator on to the CHF/JPY chart.
Know Sure Thing indicator – Trading strategies
KST + Stochastic Divergence
In this strategy, we have paired the KST and Stochastic indicator to generate buy/sell signals. The Stochastic is a leading indicator, and it oscillates between the 0 to 100 levels. This indicator gives us the buy and sell signals when it reaches the overbought and oversold area. More about the Stochastic Indicator here.
In this strategy, we are going to look for the divergence on both of the indicators to trade the market. Divergence is when the price moves in one direction, but the indicators move in other. It means the trend is going to get reversed in the market. When we see the divergence on both of the indicators, we can get a prior sign of the trend reversal.
A Bullish Divergence occurs when the prices print lower lows, but the indicators fail to make lower lows. Remember, the trend is going to get reversed when this happens.
As you can see in the below GBP/USD 60-minute chart, the market is in a downtrend, and even the momentum is weak. The market keeps on printing lower lows, but both of the indicators are having a hard time to make any lower low. Instead, the Stochastic indicator is printing a higher high, and KST indicator turned sideways. This indicates the occurrence of a bullish reversal. When the reversal happens, wait for the prices to hold at the support area to activate your buy trades.
Bearish Divergence occurs when the prices print higher highs, but the indicators fail to make any higher highs. Remember, the trend is going to get reversed when this happens.
As you can see in the below chat, the market was in an uptrend printing higher highs. But the KST and Stochastic are moving sideways and not making any higher highs. This is a sign of bearish reversal. When the reversal happens, wait for the prices to hold at the resistance area to activate your sell trades. We recommend you always to place the stop-loss order above the recent high.
KST + RSI Indicator
In this strategy, we have paired the KST with RSI indicator. RSI is known as the Relative Strength Index, and it oscillates between the 0 and 100 levels. It is a leading indicator and is quite popular in the trading community. RSI gives buy/sell signals when it reaches the overbought and oversold areas in the market. In this strategy, we are using the default settings of both indicators.
The strategy is to see if the KST indicator is going above the zero-line and giving a crossover. At the same time, RSI should produce a sharp reversal at the overbought area. If this happens, it is a potential sell signal.
As you can see in the below chart, the price is moving sideways. The crossover has happened as the KST indicator crossed above the zero-line. Also, the RSI indicator shows a sharp reversal at the overbought area. Hence it is a potential sell signal for us. Always use the recent highs to place the stop-loss and book the profits when the KST indicator gives a crossover below the zero-line.
When the KST indicator goes below the zero-line and gives a crossover, the RSI indicator also should present the sharp reversal at the oversold area for it to be a potential buy signal.
As you can see in the below chart, the market is in an uptrend. The KST indicator is giving a crossover below the zero-line, and the RSI also gave the sharp reversal at the oversold area. Hence it is a potential buy signal for us.
Know Sure Thing is a reliable momentum oscillator in the market.
It is recommended to use the default setting than experimenting with it if you are a novice trader.
If the price of a currency is falling, but the KST indicator is rising, it can be considered as a bullish divergence.
Likewise, if the price of a currency is rising, and the indicator is falling, it can be considered as a bearish divergence.
It is not recommended to rely on one indicator to take your trading decisions. Hence we suggest you pair the KST indicator with another reliable indicator to get accurate buy/sell signals. Happy trading!