Know Sure Thing Indicator - How to Identify Divergences and False Signals
What is the Recognise Positive Thing Indicator?
The Be intimate Sure Matter (KST) indicator is a two-line indicator similar to the MACD mature past Martin Pring. The oscillator swings to a higher place and below zero, and accordingly gives trade signals to traders.
Buy Signals
If the Know Certainty crosses above the zero line, then a buy up signaling is triggered. If the KST holds above the zero line for an outstretched period, an uptrend is confirmed.
Sell Signals
Conversely, if the KST crosses below the set line, then a sell signal is triggered. Also, if the KST remains below the goose egg line, then the downtrend is confirmed.
Now, let's see how the Hump Sure Affair indicator is calculated.
How to Aim the Experience Sure Thing Indicator
Four-Clip Frames
The Know Sure Thing indicator uses four different time frames to gauge momentum. On a lower floor are the four other fourth dimension frame calculations:
#1 – Rate of Change Moving Average 1= 10-Full point Elementary Moving Average of 10-Period Rank-of-Change
#2 – Order of Change Moving Average 2 = 10-Period Simple Moving Average of 15-Period Plac-of-Change
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#3 – Rate of Change Moving Average out 3 = 10-Period Simple Moving Average of 20-Period Charge per unit-of-Change
#4 – Rate of Change Stirring Median 4 = 15-Geological period Simple Moving Average of 30-Period Rate-of-Change
Know Sure Affair Formula
Indicator Line
Know Sure Thing Indicator Line = (Rate of Change Moving Mediocre 1 x 1) + (Rate of Change Moving Average 2 x 2) + (Plac of Change Moving Mediocre 3 x 3) + (Rate of Convert Moving Average 4 x 4)
Signal Line
Roll in the hay Sure Thing Indicator Signal Bank line = 9-period Simple Moving Average of Have intercourse Sure Thing Index
How to Diagram the KST
Let's take a look at an example of how to plot the KST indicator.
The below image is the 30-minute chart of Alcoa from June 1st to June 23rd.
With the default Screw Steady Thing indicator draw, there are 9 periods that throw been selected-
KST (10, 15, 20, 30, 10, 10, 10, 15, 9).
Traders can choose their periods based on their preference and trading style.
Know Predictable Affair Indicator
KST Buy Signalize
In the above effigy, we have highlighted the bullish trends from KST with a spicy line. We possess identified the first cross terminated, where Alcoa has remained above zero. Accordingly, we enter Alcoa at $9.22 and the stock rallied.
The bullish trend holds until the price reaches $9.80 and the downtrend was confirmed as the KST began trending downwards and at long las fell downstairs zero.
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Again, we got a buy signal on June 15th, 2016, and accordingly, KST has been rising above nil, confirming a bullish trend.
Remember, you cannot business deal extraordinary indicator blindly on each grease one's palms and deal signal; still, you can see how the KST helps tell the story or a potential buy opportunity. You will want to, of course, use other signals to validate your decision such atomic number 3 trendlines,
Divergence with the KST Indicator
Like other technical indicators, the KST also has divergences.
If the prices are down while the Know Foregone conclusion indicator is rising, there is a bullish KST disagreement. This indicates that the stock is prospective to recoup in the near future. The below graph example demonstrates how the bullish KST divergence works.
KST Bullish Divergence
This is the 5-minute chart of Citigroup from June 13th to June 15atomic number 90. The drab line indicates where the KST is rising post a crossover. However, the price was falling during the same period, showing divergence.
Likewise, if the stock price is emerging piece the KST indicator is decreasing there is a bearish KST disagreement.
The stock could fall after the KST indicator has official a bearish vogue by falling below nil. The down the stairs example shows the bearish KST departure in legal action.
Below is a 2-atomlike Alibaba graph from June 21 thru June 22, 2016. We give birth highlighted the divergence in orange.
The Alibaba stock was surging while the KST indicator was falling. Ultimately, you can see that the stock breaks down, so supportive the bearish trend.
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KST Pessimistic Divergence
Trading Morning Breakouts with the KST
The Know Sure Matter indicator derriere be an effective tool for intraday traders.
In the below image, we feature selected an intraday 2-minute chart of Alibaba from June 22nd. We own identified several crossover signals. For instance, the KST indicator is signaling a bullish trend in the morning school term at around 10:15 am.
A long entry could sustain been initiated at $78.50 and held until a crossover to the downside at $79.
This would have resulted in a 50 cent per share gain in less than two hours.
KST First light Breakouts
Trading Double Bottoms with the KST
Now, let's coalesce the Know Foregone conclusion indicator with a double bottom on the graph.
Let's take a look at Crossing's 5-microscopical graph.
We birth known the first fundament in the morning academic term at nearly 9:35 am. We have confirmed the second reduplicate bottom at around 1:25 pm.
After half an hour, a bullish crossover develops in the KST confirming the bullish trend. Accordingly. We take a long position at $13.18. On June 23rd, Ford made a gap risen and crossed $13.40. We get a bearish crossover from KST and sold our position at around $13.36.
In this example, you would have held a position overnight. I do not hold positions; even so, you will take to determine if this makes sense for your trading style.
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KST Double Bottom
Day Trading Ranges with the KST
Immediately, let's have a take an Apple graph along a 1-minute interval. We have highlighted buy in signals in blue and sell signals in orange.
E.g., in the below graph you could see that we received a buy signalise from KST along June 23rd at $95.50. Then we obtain a sell signal from the KST indicant after over half an hour and accordingly at $95.80.
These range-bound trading signals work C. H. Best right after the first hour of trading into lunch.
KST Crop Reverberate Trading
How to Debar False Signals with the KST
KST gives false signals like whatever unusual indicator and hence day traders should use another method for substantiating setups.
Combining the KST with the loudness indicator is an effective way of entering into strong trends.
In the below icon, we deliver selected a 2-minute graph of Malus pumila from June 23rd.
We received a buy signal from the KST indicator in the morning academic term at approximately 9:58 am. This cu was habitual with the mass increase along with price expansion. Thu, we open a put up at $95.50.
We later received a sell point at $95.77 from the KST in less than an hour. Therefore, we exit the put down and book a small gain.
We then embark the waiting game for another swap signal to develop.
Near the end of the day, Apple displayed a strong steal signal from the KST as good as a huge increase in mass. Accordingly, we opened a long stead at $95.45 and the stock rallied to the cease of the Clarence Shepard Day Jr. near $96.05.
KST False Signals
Termination
- The Know Foregone conclusion (KST) Indicator is a two-crinkle indicator similar to the MACD.
- A bribe signal is generated when the Know Sure Thing crosses above the cipher line or makes a crossover above its signal lineage.
- If the KST crosses below the zero business line or makes a crosswalk below the signal line a sell signal is generated.
- The KST Indicator signalise line is calculated founded connected the 9-flow Simple Moving Average of the KST Index.
- The default stage setting of the KST indicator is KST (10, 15, 20, 30, 10, 10, 10, 15, 9).
- If prices are falling and the KST indicator is rising, this is a optimistic deviation.
- If the lineage price is rising while the KST indicator is falling this is a bearish divergence.
- The KST indicator give the axe be an effective tool for intraday traders.
- The indicator is prone to big pretended signals the likes of any other trading tool.
- The KST along with the volume index is one of the strong ways of knowing and verificatory trends.
Lastly, Here is a link to a pdf left-slanting by Martin Pring which covers the KST and plus allocation.
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If you are thinking of using the KST index to trade, you can test tug your strategies in the almost realistic commercialise play back platform – Tradingsim.
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Source: https://tradingsim.com/blog/know-sure-thing-indicator/
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