Is this indicator better than the MACD indicator? and will it make you more money in trading? In this video, I took 100 trades with a MACD look a like, and the results were pretty interesting. As you know, MACD was the best performing indicator we have seen on the Trading Rush Channel. If an indicator can perform better than the MACD indicator, it will be a big deal, because MACD strategy with a 1.5 to 1 reward risk ratio gave a win rate of more than 60 percent after testing 100 times, and if we stumble upon a new strategy or indicator that gives more win rate than that, we will be talking big profits. There is an indicator that looks very similar to the MACD indicator. Is this the next big thing? Will this make more money than the MACD strategy? Let’s find out.
Know Sure Thing is a momentum based indicator just like the MACD indicator. On the TradingView Platform, it looks like this, and as you can tell, it looks very similar to the MACD indicator. There is a KST line and a signal line, and the Know Sure Thing value crosses above and below a zero line. Since this is a momentum indicator, traders use it to spot all kinds of momentum indicator things like divergences and crossovers. What we want is to find out if it actually works in the long run. There are multiple trading strategies based around the KST indicator, and Here’s how one of the Know Sure Thing Strategy goes.
When the KST line crosses above or below the signal line, it can indicate a change in momentum. So when the KST or Know Sure Thing line crosses above the signal line, it’s a buy signal. Furthermore, the KST value has to be below the 0 line. Similarly, when the KST line crosses below the signal line, it is a sell signal. Furthermore, the sell crossover has to be above the zero line.
Here’s an example, the KST line crosses above the signal line and the crossover is below the zero line. If you would have bought it here, KST would have made you money. And in this example, the KST line crosses below the signal line, and the crossover is above the zero line. If you would have sold after the crossover, KST would have made you a profit. But wait, don’t be fooled by looking at these hand picked setups. This doesn’t mean that this strategy is profitable at all. If you have watched other videos on the Trading Rush Channel, like the video if you have, you already know there is one thing wrong with this setup. In this Know Sure Thing Setup, Know Sure Thing Doesn’t Know the Long term trend direction. And subscribers of this channel know that you can increase your chances of making money as a trader by taking trades in the long term trend direction.
If you take all entry signals given by the Know Sure Thing Indicator, you will probably lose money because know sure thing can give short entry signals in a strong up trending market, and vice versa. So to fix that, we will use the 200 period exponential moving average. This will show you the direction of the long term trend direction, and filter false signals.
So the complete modified Know Sure Thing Trading Strategy goes something like this. If the crossover is below the zero line, and above the 200 period moving average, The Long entry signal is when the KST line crosses above the signal line. Crossover below the zero line, and above the 200 period moving average. Stop loss below the pullback.
Similarly, If the crossover is above the zero line, and below the 200 period moving average, the short entry signal is when the KST line crosses below the signal line. Above the zero line, but below the 200 period moving average. Stoploss goes above the pullback of the trend.
In this example, price is in a strong uptrend, we can tell it is in an uptrend because it is staying above the moving average. The KST indicator gave a bullish crossover below the zero line. So the entry is after the crossover, and stoploss is below the pullback.
Here, price is below the 200 period moving average, so we will only look for short entry signals. The KST indicator gave a short entry signal, and the signal was above the zero line. So the entry is after the crossover, and stoploss is above the pullback.
Now that you understand how the strategy works, let’s test the Know Sure Thing Trading Strategy 100 times, to make sure the know sure thing actually knows what it is talking about. After testing 100 times, here’s what I found out.
Number 1. Know Sure Thing is just like other momentum indicators, it shows the strength and weakness. You can use this information to find if the pullback of a trend is getting weaker or not. Obviously, we are using the KST indicator as a trend following indicator, and in a trend, we are using it to find the end of a pullback. And while testing, it was indicating the end of the pullbacks with a good accuracy. Now, I say good, but it is not as accurate as the MACD indicator. Earlier in this video, you saw me compare it with the MACD indicator, and if you put them side by side, they visually look very similar. In fact, if you remove the histogram from the MACD indicator, most people probably won’t be able to tell the difference between the two. But if you look closely, you will notice something. During backtesting, the KST indicator was not as good as the MACD indicator, and if you look closely, you will notice why. As you can see, the entry signals given by the KST indicator are a little bit late than the entry signals given by the MACD indicator.
Look at this example. Price is in a downtrend, and both of them gave a short entry signal. But as you can tell, the MACD signal was way better than the KST signal. With the MACD signal, with entry at the MACD candle and stop loss above the pullback, you could have made 3 times more profit than your risk. But on the other hand, after the KST signal, price didn’t even go down enough to reach the 1 to 1 reward risk ratio.
In other words, the KST indicator is indicating the end of a pullback quite accurately, but it is a bit late, especially when compared with the MACD signals. Because of this, the probability of the price reaching you higher reward risk ratio profit target becomes lower.
In the end, after 100 trades with the Know Sure Thing Indicator, I found out that the win rate of the KST indicator is approximately 52 percent with a 1.5 to 1 reward risk ratio. In the Official Trading Rush App, you can see that the Know Sure Thing Trading strategy made a profit! It made a profit of 3000. The highest profit was 3300. The profit graph also looks consistent with 6 losses in a row, but 7 winners in a row. This win rate is not as bad as some other trading strategies we have seen, but not as good as some other strategies we have tested on the Trading Rush Channel. But one thing is sure, the Know Sure Thing really knows what it is talking about. If you haven’t seen trading strategies with more win rate than this, check out other trading strategy videos on the Official Trading Rush Channel.
