What Is The KST Oscillator & How To Trade With It

The KST Oscillator or Know Sure Thing Oscillator is a momentum-based oscillator. Developed by Martin Pring, the oscillator makes the rate-of-change readings smooth for the traders. It gives the four different timeframe readings, measuring their momentum and combining them into a single momentum oscillator. The KST Oscillator indicator can be used on your forex trading platform charts to help filter potential trading signals as part of an overall trading strategy.

What is the KST Oscillator?

In the 1992 edition of Stocks and Commodities article, Pring describes the KST Oscillator as “Summed Rate of Change.”

The indicator gets its name Know Sure Thing Oscillator because its calculation is based on the ROC (rate of change) indicator and the SMA (simple moving average). The ROC has four different periods, and SMA is of 9-period.

The equation for the KST oscillator is:

KST = (RCMA #1*1) + (RCMA #2*2) + (RCMA #3*3) + (RCMA #4*4)

Where;

  • RCMA #1=10-period SMA of 10-period ROC
  • RCMA #2=10-period SMA of 15-period ROC
  • RCMA #3=10-period SMA of 20-period ROC
  • RCMA #4=15-period SMA of 30-period ROC​
KST Oscillator on a chart
KST Oscillator on a chart

On MT4, the default parameters of the KST Oscillator are; 10, 15, 20, 30, 10, 10, 10, 15, 9. The first four values describe the ROC settings. The next four moving averages of the ROC indicator. The last number is a signal line moving average.

KST Oscillator parameters
KST Oscillator parameters

The KST Oscillator is interpreted by the 0 level and has two lines; the KST and the signal line. Go long when the KST crosses above its signal line from below. This is known as positive KST. Conversely, go short when the KST crosses below the signal line from above. This is called negative KST.

Pring mentioned in the article that KST Oscillator could be used on a short, medium, and long-term timeframe. He suggested changing the settings suitable for each timeframe. It is thought that the KST Oscillator can help when used on weekly and monthly charts.

How to use the KST Oscillator?

The KST Oscillator can be used similarly to other momentum oscillators like the RSI indicator (Relative Strength Index) and Stochastic indicator.

A buy signal is generated when the KST crosses above the 0 level. If the KST stays above the 0, this indicates an uptrend. On the other hand, if the KST crosses below the 0 level, a sell signal is generated. And, if it remains below the 0, it’s a sign of a downtrend.

Divergences are also possible with the KST Oscillator. If the prices are falling and the KST is rising, this is a sign of a bullish divergence.

KST Oscillator bullish divergence
KST Oscillator bullish divergence

And, if the prices are rising and the KST is falling, this indicates a bearish divergence.

KST Oscillator bearish divergence
KST Oscillator bearish divergence

Unlike the Stochastic or the RSI, the KST Oscillator doesn’t have an upper or lower limit. Thus, it is probably not ideal for overbought and oversold trading strategies.

KST Oscillator trading strategy

As we mentioned before, the KST is often use on weekly and monthly charts. This can help traders in long-term trading strategies.

Traders who apply simple trading strategies, the KST can help them determine the strength of the trend and breakout trading strategy signals.

You can combine the KST with other technical indicators to enhance your forex trading strategy.

KST Oscillator buy strategy

  • The KST oscillator should be above the zero line.
  • Wait for the price bar to go bullish before entry.
  • Set a stop-loss near the recent swing low.
  • Exit the trade when the oscillator drops.
KST Oscillator buy setup
KST Oscillator buy setup

KST Oscillator sell strategy

  • The KST should be below the zero line.
  • Wait for the price bar to go bearish before entry.
  • Set a stop-loss near the recent swing high.
  • Exit the trade when the oscillator rises above.
KST Oscillator sell setup
KST Oscillator sell setup

KST Oscillator Conclusion

The KST Oscillator is a powerful momentum indicator which can be used on all timeframes. It combines the four different cycles into a single oscillator. One of the effective ways to use the KST is with the Volume Indicator. This helps validate trends. To try and avoid whipsawing, we could use the KST Oscillator on weekly or monthly charts.

I would prefer to use the majority of technical indicators such as the KST Oscillator indicator on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels or a particular indicator value has been reached.

The KST Oscillator indicator is just one indicator amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.

Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.

The methods of implementing the KST Oscillator indicator into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice trading with the KST Oscillator indicator, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!