Forex Trading Style: The KST Technique
Being involved in forex trading requires continuous research and application of various trading styles. Today's strategy requires computation as it is similarly used just like momentum oscillators. This is called the KST Technique.
What is KST Technique?
KST is an acronym for Know Sure Thing. As mentioned earlier, this technique belongs to the group of momentum oscillators and it is designed to analyze rate-of-change price data. As a trader, you know that you are able to generate trading signals when you see that KST crosses over the signal line. In order to make this technique work more effectively, expert traders and financial advisors suggest combining KST with other technical analysis approaches such as non-momentum indicators, chart patterns, or candlestick patterns.
How is KST Calculated
Using this technique in your trading sessions requires knowledge of arithmetic and computation. As much as possible you have to memorize the KST Equation by heart to be able to effectively use such a technique. Below is the equation along with the elements that you need to complete the equation.
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
Defining the Elements of the KST Equation
1.Simple Moving Average(SMA)
The SMA is one of the KST equation elements whose function is to calculate the range of selected price ranges. Most of the time, it uses the closing rates, by the number of periods in that range.
2. Rate of Change ( ROC)
This element usually uses the Greek letter delta to represent the speed when an element changes at a certain time. In other words, it can generally be stated as a ratio between a change in one variable relative to a corresponding change in another variable. And when you graph such a change, you would most likely see a line that slants downward.
How do we use the KST Technique?
We have already mentioned that the KST technique is usually used by momentum traders. So if you wish to try this strategy for the first time, we suggest that you rehearse its application on a demo account prior toits usage on live trades. Please don't forget that every trading strategy or technique is always accompanied by some risks. Bear in mind that what is applicable and suitable to other traders may not fit you. So we remind you to religiously practice its usage prior to actual application. When you have finally made up your mind to try this, always remember these easy steps: First, you have to be able to pinpoint a ranging zone or consolidation. Then wait for fora breakout to occur. Upon spotting the breakout, make sure that your KST shows a momentum indicator reading to confirm the breakout.
Conclusion:
When applied and handled properly in every forex trading session that you do, the technique becomes a powerful tool to obtain success when trading during a momentum burst. Thus, we strongly recommend following the trading principles that go with this technique and use it alongside the other indicators to obtain stronger and more effective market moves.
