The Know Sure Thing (KST) binary options indicator is a momentum-based oscillator. Its primary purpose is to assess the strength of price momentum based on the smoothed rate of price change across four different timeframes. The indicator can generate several types of trading signals, but not all of them are well-suited to binary options trading. In this review, we'll discuss how to use this tool most effectively.
Contents:
- Key Features
- Installation
- Overview and Settings
- Trading Rules for KST
- Opening a Call Option
- Opening a Put Option
- Conclusion
Key Features of the KST Indicator
- Terminal: MetaTrader 4
- Timeframe: M5
- Expiration: 3 candles
- Option types: Call/Put
- Indicators:
- Trading instruments: currency pairs, commodities, cryptocurrencies, stocks
- Trading hours: 08:00–21:00 UTC
- Recommended brokers: Quotex, Pocket Option, Binarium
Installing the KST Binary Options Indicator
The KST indicator is installed in the MetaTrader 4 platform using the standard procedure. To do this, add it to the terminal's root folder by selecting "File" in MetaTrader 4, then "Open Data Folder." In the folder that opens, navigate to "MQL4," then "Indicators," and move all the files there. Templates are installed in the same way, but placed in the "Templates" folder. For more detailed installation instructions, watch our video:
KST Indicator Overview and Settings
The KST indicator was developed by renowned trader and technical analyst Martin Pring. Many traders will be familiar with his classic works, including "Technical Analysis Explained," "Investment Psychology Explained," and "Martin Pring on Market Momentum." Pring's central argument is that technical analysis is a tool for assessing market cycles and crowd psychology.
By combining trend, momentum, and macroeconomic analysis, he created a trading method that has remained widely used for many years. The Know Sure Thing indicator was one element of his broader approach to studying financial markets. It is widely used across various trading strategies to identify short- and long-term trend reversals.
What exactly is this indicator? At first glance, KST appears to be a standard momentum oscillator. Unlike similar tools, however, the Know Sure Thing combines four smoothed moving averages of Rate of Change (ROC) indicators with different time parameters.
The result is a tool that allows traders to quickly assess the direction and speed of price change across four timeframes simultaneously, providing a more complete picture of trend strength and direction while filtering out short-term market noise.
The KST indicator generates three types of signals:
- Signal line crossover — the primary signal;
- Zero line crossover — trend confirmation;
- Divergence.
Let's look at each in more detail.
Signal Line Crossover
Like most oscillators, the Know Sure Thing indicator has a signal line calculated as a moving average of its values. A buy signal for Call options occurs when the KST line crosses upward through the signal line, indicating strengthening upward momentum. Conversely, a downward crossover signals weakening momentum — a cue to consider Put options in binary options trading, or short positions in Forex.
Zero Line Crossover
The zero line acts as the key boundary between bullish and bearish market sentiment. Crossing it confirms the prevailing trend direction. When the KST line rises above zero, it indicates buyer dominance and a favourable moment to open Call options. When it falls below zero, sellers take control.
Divergence
A divergence signal occurs when the asset price and the KST indicator move in opposite directions. A bullish divergence forms when the asset price makes a new lower low while the KST line forms a higher low.
A bearish divergence forms when the asset price makes a new higher high while the KST line forms a lower high. Both examples are shown in the image above: bullish divergence on the left, bearish divergence on the right.
The Know Sure Thing indicator has many parameters, but only a few are essential.
The most important parameters are the calculation periods of the built-in ROC indicator. These four periods determine how quickly KST responds to market changes. Based on our tests on the M5 timeframe for the USDJPY currency pair, we recommend the settings shown in the image above. Keep in mind, however, that these parameters should be optimised individually for your asset and timeframe. The price type and moving average method used in the calculations are best left at their default values.
If you'd like to deepen your understanding of trading strategy development and the fundamentals of market analysis, we recommend this selection of books on the topic:
- Trading for Dummies: What Should a Beginning Investor Read?
- Forex Trading Books
- "The Stock Exchange at Your Fingertips" by Viktor Ilyin and Valery Titov
- "Come Into My Trading Room: A Complete Guide to Trading" by Dr. Alexander Elder
- "Trading for a Living" by Alexander Elder
- "Games Business Experts Play" by L. Michael Hall
- "Trade Your Way to Financial Freedom" by Van K. Tharp
Trading Rules for the KST Indicator
We trade using the KST indicator based on the first signal type — the signal line crossover. Wait for a blue dot to appear below the candlestick to buy a Call option, or a red dot above the candlestick to buy a Put option. These visual markers make it easy to identify the candle on which the KST line crosses its signal line.
Opening a Call Option
- Wait for the KST line to cross the signal line from below.
- A blue dot appears below the candle.
- At the open of the next candle, buy a Call option.
Opening a Put Option
- Wait for the KST line to cross the signal line from above.
- A red dot appears above the candle.
- At the open of the next candle, buy a Put option.
We recommend setting the expiration time to three candles. However, the optimal holding period depends on the specific asset and should be determined through historical data testing. This approach will help you tailor the strategy to your chosen instrument and improve overall performance.
How to Get the Most Out of the KST Indicator
To enhance the effectiveness of the KST indicator, its author Martin Pring recommended using signals not in isolation, but in combination with trend lines and candlestick patterns. Based on experience with this tool, it performs best on longer timeframes, as it was originally designed to track medium- and long-term cycles in financial markets.
Advantages of the KST Indicator
The key strength of this oscillator is its more comprehensive, multi-dimensional approach to market analysis — achieved through a formula that combines rate-of-change data from four timeframes simultaneously. This allows KST to filter out short-term market noise effectively and produce clearer signals of trend reversals.
Disadvantages of the KST Indicator
KST's main drawback is signal lag, which results from the extensive smoothing involved in its calculation. By the time a trading signal appears, a significant portion of the price move may have already occurred. In ranging or flat market conditions, the indicator can also generate a high number of false signals.
Conclusion
The Know Sure Thing (KST) indicator is a capable tool for identifying trend direction and reversals. However, due to the complexity of its calculations and the number of configurable parameters, it is not recommended for beginners. It is best used alongside chart pattern analysis and Japanese candlestick patterns.
Before using KST for live binary options trading, be sure to practise on a demo account with a reliable broker. Take the time to understand how the indicator behaves, follow the trading rules consistently, and always apply sound risk and money management principles. Happy trading!
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