Know Sure Thing (KST) Oscillator is a complex, smoothed price velocity indicator developed by Martin J. Pring.
Rate of Change (ROC) indicator is the foundation of KST indicator. KST indicator is useful to identify major stock market cycle junctures because it formula is weighed to have larger influence by the longer and more dominant time span to better reflecting the primary swings of stock market cycle. The concept behind the oscillator is that price trends are determined by the interaction of many different time cycles and that important trend reversals take place when a number of price trends are simultaneously changing direction.
Four different rates of change are calculated, smoothed, multiplied by weights and then summed to form one indicator.
ROC1 = (1 – Price/Price(X1)) * 100;
ROC2 = (1 – Price/Price(X2)) * 100;
ROC3 = (1 – Price/Price(X3)) * 100;
ROC4 = (1 – Price/Price(X4)) * 100;
Where Price refers to current closing price and Price(X1) refers to the closing price X1 bars ago.
KST = MOV(ROC1,AVG1) * W1+MOV(ROC2,AVG2) * W2+MOV(ROC3,AVG3) * W3+MOV(ROC4,AVG4) * 4
Where MOV(ROC1,AVG1) refers to the AVG1 day moving average for ROC1
For Short term trend, Martin J Pring suggest the following parameters:
X1 = 10
X2 = 15
X3 = 20
X4 = 30
AVG1 = 10
AVG2 = 10
AVG3 = 10
AVG4 = 15
W1 = 1
W2 = 2
W3 = 3
W4 = 4
The formula is built into, or can be included into various technical analysis softwares like MetaStock or OmniTrader.