The Know Sure Thing (KST) oscillator was developed in order for traders to better see the rate of change of a given index or security. Rate of change is the speed of how quickly an instrument changes over a period of time, measured as a percentage. KST is primarily a momentum indicator that allows traders to spot turning points in the market more easily.
How to use the Know Sure Thing (KST)
You can read the KST similar to other momentum indicators such as the relative strength index (RSI) or the moving-average-convergence-divergence (MACD). The indicator itself consists of two lines, with the red acting as the signal line. Crossovers between the main indicator and the signal line is the main method of interpreting buy and sell signals.
Other signals generated by the KST include divergences and convergences between price and momentum. One example of a divergence is when price makes successively higher highs while the KST makes lower lows. In this case, momentum is diverging from price in a negative fashion to the downside. You could, therefore, expect that prices will soon follow in this negative trend as momentum typically leads the price action.
In another scenario where the KST is making higher highs while prices makes lower lows, you could then make the assumption that higher prices will soon follow suit.
Combining the Know Sure Thing with other indicators
Although useful as a momentum indicator, the KST should not be used in isolation. Depending solely on the KST can lead to false signals and an incomplete technical picture of a security’s financial performance. You can insted look for other factors such as volume, price patterns, and other indicators. When combined, you can be left with the most information possible to create profitable trrades that are likely to result in long-term success.