Five Steps To A Winning Trading System by Matt Blackman
Whether you use your own system or someone else’s, a big
part of the development of any trading strategy is testing to
see how well it works. Here we go through the step-by-step
process of how to test a system that uses Martin Pring’s Know
Sure Thing (KST) indicator.
As part of a continuing education in technical
analysis, there are two books that should not
be overlooked by serious traders. They are
Technical Analysis Of The Financial Markets
by John J. Murphy and Technical
Analysis Explained by Martin J. Pring.
Both are, in fact, required reading for those who wish to
obtain the Chartered Market Technician (CMT) designation
awarded by the Market Technicians Association.
Pring is also the creator of a custom indicator he refers to
as the “KST (Know Sure Thing),” which plots the moving
averages of a series of rates of change (ROC) with various
weightings. The indicator is designed to analyze trend and
warn of impending change. Like other momentum indicators,
divergence is an important component in the KST to provide
warning of impending trend reversals. The KST combines a
momentum indicator with an analysis of time cycles, so it
works best with equities that are more cyclical in nature.