Learn the Know Sure Thing Indicator Strategy to buy and sell stocks focusing exclusively on momentum trading. This guide will cover the need-to-know principles behind the Know Sure Thing oscillator. If you’re looking to develop your trading skills to correctly read the market strength and weakness you have landed in the right place. The Know Sure Thing technical indicator will help you achieve those goals.
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How to make momentum work in your favor?
How to trade that quick burst of momentum?
The simple answer is to trade with a momentum indicator if you want to achieve the best results. Momentum indicators make it easy for traders to determine where a price is moving. It is a principle of price behavior that momentum precedes price. The dynamics of price state that if momentum makes a new high or low, in the end, the price will follow the leading of momentum.
To take full advantage of the Know Sure Thing oscillator, we recommend to day trade using these momentum indicators.
There is nothing wrong with using indicators. However, when you use technical indicators to gain an edge in the market, you have to make sure you understand what the Know Sure Think indicator is telling you.
What is Know Sure Thing Technical Indicator
Know Sure Thing, or KST indicator is a momentum-based indicator that is part of the oscillator family in technical analysis. The Know Sure Thing technical indicator was developed by Martin J. Pring, founder of Pring Research and best seller author of Introduction to Technical Analysis. Like all momentum oscillators, the Know Sure Thing oscillator can help traders finding buy and sell signals generated by:
- Crossover signals
- Bullish and bearish divergence
- Overbought and oversold readings
- Crossovers of the central line
Learn more about the three different types of technical indicators here: Best Forex Indicators to Generate Buy and Sell Signals.
Mr. Pring referred to the momentum indicator as to the "Summed Rate of Change (KST)." The name is derived from the fact that the Know Sure Thing indicator uses in its calculation the Rate of Change (ROC) indicator. The ROC indicator measures the strength of price momentum.
The Know Sure Thing employs four different market cycles, combining four different time-frames:
- Rate of Change Moving Average 1= 10-Period Simple Moving Average of 10-Period ROC.
- Rate of Change Moving Average 2 = 10-Period Simple Moving Average of 15-Period ROC.
- Rate of Change Moving Average 3 = 10-Period Simple Moving Average of 20-Period ROC.
- Rate of Change Moving Average 4 = 15-Period Simple Moving Average of 30-Period ROC.
By combining these four time frames, Pring obtained a smoothed version of Rate-of-Change. Combining them into a single momentum indicator you can have better odds to beat the market. On top of that, a 9-period SMA was added as a signal line to complete the KST indicator.
Check out the key to successful trading by studying the benefits of Multiple Time Frame Analysis.
The default Know Sure Think indicator settings has the following parameters:
Let’s break down each of these KST parameters:
- The first four figures represent the ROC settings.
- The second four figures represent the moving averages for these ROC.
- The last figure is the signal line moving average period.
Let’s now examine some of the features and how to use Know Sure Thing momentum oscillator:
How to Use Know Sure Thing Oscillator?
The Know Sure Thing oscillator can be used in the same fashion as other popular momentum indicators, such as the Stochastic indicator. Most day traders are using the KST indicator as an overbought/oversold indicator or crossover signal. However, we have a better trading method. Most of the traditional momentum signals come after the momentum burst has started.
Check out six easy steps on how to day trade using the Stochastic indicator.
If you’re looking to develop your own trading strategy to take advantage of Know Sure Think oscillator, we have an unorthodox trading approach.
We’re going to reveal our Know Sure Thing trading strategy throughout this trading guide.
But, first, let’s explore what other ways you can use the momentum oscillator.
We would like to point out that the bullish and bearish divergence signals are very powerful. When we have a bullish divergence signal on the Know Sure Thing indicator it will not disappoint you. However, the bullish and bearish divergence signals are not that common on the KST oscillator.
See Twitter stock chart below:
Every signal generated on the KST indicator has its own nuance. It’s not wise to use the trade signals on their own merits, but rather use them to design your own trading system around them. The same is true with the next Know Sure Thing trade signal.
How to use the Know Sure Thing zero line to spot bullish and bearish momentum signals:
- A buy signal is triggered when the Know Sure Thing crosses above the zero line. If the KST moving averages hold above the zero line, a bullish trend is confirmed.
- A sell signal is triggered when the Know Sure Thing crosses below the zero line. If the KST moving averages hold below the zero line, a bearish trend is confirmed.
See GM stock chart below:
Now you know how to use the Know Sure Thing indicator. Your goal should be to master these simple trade setups. The more time you spend studying these trade signals, the more efficient you will become.
Moving forward, we’re going to touch on the importance of knowing when to use the Know Sure Thing indicator.
Are there any favorable market conditions that the KST indicator operates the best?
Let’s answer this question.
When to Use the Know Sure Thing Technical Indicator
The Know Sure Thing technical indicator is a very practical tool for day traders.
Momentum tends to last only for a short period of time. The price has the tendency to consolidate more than to experience price expansion aka momentum bursts. Often times the burst of momentum can be only observed on the intraday price chart. That’s the reason why we recommend day trading with Know Sure Thing.
For traders who prefer simple trading strategies, the KST oscillator should be considered for evaluating:
- Breakout trading signals.
- Assessing the strength of a trend.
See Amazon stock chart below:
Breakouts are usually the primary source for generating momentum bursts. The natural law of price behavior shows that stocks, futures, Forex currencies, commodities and cryptocurrencies move in short-term momentum bursts. Price tends to move back and forth from equilibrium (consolidation) to disequilibrium (expansion).
With this knowledge in mind, we can now predict volatility changes in the price.
The best risk to reward trades are various breakout setups.
Our team at TSG loves trading breakouts out of a consolidation zone.
Consolidation breakouts are the leading source of the most powerful bursts in momentum.
These types of trades usually show us a profit right from the start. But in order to avoid false breakouts, we’re going to use the Know Sure Thing tool.
We don’t like to use the KST indicator to capture trend momentum. This is because these types of momentum bursts can lead to buying or selling climax and subsequently to trend reversals. When you see a rapid change in momentum this can also be a sign of price exhaustion. That’s why an impending reversal may occur. But, we want to avoid engaging in that type of trading activity.
Learn the secret of buying and selling climax signals with Mass Index – Ultimate guide to Trend Reversal.
If you’re confused about the concept highlighted above, please check the Know Sure Thing chart below:
Let’s now outline how to identify good momentum bursts with our proprietary Know Sure Thing Indicator Strategy.
We know you’re going to like this trading strategy.
Know Sure Thing Indicator Strategy
There are no silver bullets when it comes to trading momentum bursts. You need to be ready to put in the time to practice the Know Sure Thing indicator strategy. To make it easy for you to remember and better understand the Know Sure Thing trading rules, we have developed a three-step process:
- Identify a ranging zone or consolidation.
- Wait for the breakout.
- Check if the momentum reading on the KST indicator is confirming the breakout.
If you master this trading process, you’ll build an enduring market edge. Your goal is to become a master trading the Know Sure Thing momentum bursts.
Let’s get started:
Step #1 Identify a Ranging Zone
Regardless of the time frame used, we define a ranging zone as comprised of two equal highs and two equal lows.
Well, the lows and highs don’t need to be equal.
But, the closer they are, the more defined our trading range would be.
And, the more defined our range is, the higher the chance of a breakout and subsequently to experience a momentum burst.
Let’s see the Know Sure Thing chart below:
In the above example, we highlighted a well-defined trading range on the Tesla chart.
Once the range is established, we wait for the breakout to generate that momentum burst.
Breakout trading is like trading momentum on the back of your trade.
Step #2 Wait for a Break of the Range
This is self-explanatory!
If you don’t know what a breakout is? Don’t worry, we got your back.
In simple terms, a range breakout is an explosive move outside the trading range.
In the example given, we can notice a clear breakout that holds below the range support level.
This is a breakout of support.
See Tesla chart below:
We can avoid false breakouts, which means the momentum is drying out pretty fast after the initial breakout. We simply use the Know Sure Thing indicator to track the momentum activity.
Let’s now see how to identify high probability trading breakouts likes a pro:
Step #3 Check the Momentum Reading on KST oscillator
Once the market breaks out of an equilibrium point, we want to make sure there is enough juice aka momentum for the price to follow through. How much juice a stock has can be observed on the Know Sure Thing oscillator.
Using the KST oscillator, we can avoid false breakouts like a Hedge Fund manager.
We can observe a buildup in momentum as the Know Sure Thing lines are holding below the zero line.
See KST oscillator chart below:
This is a clear indication of real stock sellers.
Once momentum is set in motion, a trend is more likely to continue than to reverse. And, once a trend is established and going in full motion it will take a sizeable force to turn the tide around.
This is the best ideal scenario to trade!
Final Words – KST Indicator
Know Sure Thing oscillator is a powerful leading indicator that can help you trade momentum bursts. Momentum aka the buying and selling pressures can be your best trading friend. Next time you make a momentum trade, make sure your trade doesn’t break the trading principle of the Know Sure Thing indicator strategy.
For all newbies out there, if you’re interested in becoming a Forex trader we created the Forex Trading for Beginners Guide to help you set realistic expectations.
Study price charts and see if you can spot momentum bursts before they happen. Once you learn how to use the Know Sure Thing technical indicator, you’ll instinctively know how to trade momentum bursts.
Thank you for reading!
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