System Design  |  JUL 2003

Five Steps To A Winning Trading System by Matt Blackman

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.

by Matt Blackman