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1992issue C021-12

A KST oscillator from a weighted rate-of-change stack

Four smoothed rate-of-change series, weighted in proportion to their time spans, form a KST composite. A short moving average of that composite supplies a crossover signal, while longer averages and majority-vote barometers are used for confirmation.

  • A rate-of-change oscillator divides the current-period price by the price n periods earlier, so a 10-day series compares today's price with the price 10 days ago.
  • Four smoothed rate-of-change series, weighted 1, 2, 3, and 4 and then divided by 10, form a KST composite that is not limited to one cycle length.
  • The same recipe scales from a 10- to 30-day stack to 10- to 20-week and 9- to 24-month versions.
  • A 15-day average of the short-horizon oscillator is an example moving-average-crossover rule, while a 12-month average and a six-of-ten consensus barometer are used for confirmation rather than an exact historical fit.
Entries in this reading3 entries
Current trackRate of Change50 readingsMoving-average crossover108 readingsMoving average449 readings

A rate-of-change oscillator is constructed by dividing the current-period price by the price n periods earlier. A 10-day example uses today's price over the price 10 days ago.

Why a single rate-of-change can mislead

A single rate-of-change series reflects only one cycle length. It can mislead when another cycle dominates or when a strong trend is in force. Wide trading ranges are the setting where that single series is described as more useful.

Four smoothed series become one KST

One construction that addresses that single-cycle fragility is to combine four smoothed rate-of-change oscillators into one composite, weighting each series in rough proportion to its time span.

A short-horizon composite can be built from 10-, 15-, 20-, and 30-day rates of change. Each series is smoothed with a 10-day simple moving-average, except the 30-day series, which uses a 15-day simple moving-average. Those four smoothed series are then weighted 1, 2, 3, and 4 respectively, summed, and divided by 10, the sum of the weights.

That weighted sum is the KST: four separately smoothed rate-of-change oscillators, with heavier weight on the longest lookback, then scaled by the sum of the weights.

The same recipe at longer horizons

The same recipe scales to other horizons. An intermediate version can use 10-, 13-, 15-, and 20-week rates of change. A long-term version can use 9-, 12-, 18-, and 24-month rates of change.

A short average turns the composite into a signal

The composite is often paired with a short moving-average of itself as a moving-average-crossover rule. A 15-day simple average of the short-horizon oscillator is given as an example, with a cross below that average from a high reading treated as a sell signal.

A 12-month moving-average is described as the most reliable long-term average across most markets in this construction discussion, while still failing from time to time.

Confirmation by majority, not a fitted turning point

Business-cycle stage is framed as a confirmation problem. A stock-price peak is treated as more consistent when a bond index is below its 12-month moving-average and a commodity index is above its 12-month moving-average.

A consensus barometer tallies many imperfect indicators with a majority threshold, six of ten, rather than fitting historical peaks and troughs exactly. The design is intended to reflect the future environment instead of an overfitted past.

Gold with its 26-week average, 1982–1989

Gold sold off from the low 400s toward 300 into 1985, then recovered toward 450 by 1987–88. Spot prices and the 26-week average were read from the printed 250–550 scale on the sidebar gold panel — the same figure that stacks short-, intermediate-, and long-term KST oscillators. Those oscillator panels are not rebuilt here because their vertical scales cannot be read tightly enough from the scan.
Gold sold off from the low 400s toward 300 into 1985, then recovered toward 450 by 1987–88. Spot prices and the 26-week average were read from the printed 250–550 scale on the sidebar gold panel — the same figure that stacks short-, intermediate-, and long-term KST oscillators. Those oscillator panels are not rebuilt here because their vertical scales cannot be read tightly enough from the scan.Gold · weekly · 1982-01-01T00:00:00.000Z to 1989-12-31T00:00:00.000Z

Digitized from a rotated magazine scan; prices rounded to the nearest $10 against the printed 250–550 scale. Calendar time follows the printed 1982–1989 year marks.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
8 of 46 in the Rate of Change track
19921-2 pp.Next on Rate of ChangeFour-window weighted rate-of-change compositeA rate-of-change reading is formed by dividing the latest price by the price from a chosen number of periods earlier, so each lookback stands for one cycle length.
All readings on this track · 46 readings
  1. 1985Constructing excess and momentum difference-curve oscillators
  2. 1988Five reading rules for smoothed indicator charts
  3. 1989Momentum overlays that speed moving-average oscillators
  4. 1990A laboratory template that constructs Rate of Change as a pane module
  5. 1991Volume-scaled rate of change as a momentum construction
  6. 1991Three-indicator market overview from tape, sentiment and rates
  7. 1991Three-component trend model with rate-of-change filters
  8. 1992A KST oscillator from a weighted rate-of-change stack
  9. 1992Four-window weighted rate-of-change composite
  10. 1992Constructing multi-span smoothed rate-of-change filters
  11. 1992Constructing a four-horizon summed rate of change
  12. 1992Constructing KST from four weighted smoothed rates of change
  13. 1992Constructing a composite from weighted smoothed rates of change
  14. 1992Three-horizon KST maturity alignment
  15. 1992Construct a bond-led dividend-to-bond-yield regime first
  16. 1992Constructing relative-strength KST from weighted rate-of-change
  17. 1993Constructing a volume oscillator from average ratios and smoothed rate of change
  18. 1994Gold as a cycle clock for commodities and yields
  19. 1994Constructing a composite from weighted, smoothed rate-of-change windows
  20. 1994Constructing gold-mining rate-of-change tripwires for Treasury bonds
  21. 1994A capacity-stress checklist across commodities, bonds, and breadth
  22. 1994Rate of change parameters for testable entries
  23. 1994Constructing rate-of-change midpoints, lookbacks and divergence
  24. 1994Lead oscillator breaks need price trendline confirmation
  25. 1994Nested averages for an annual momentum curve
  26. 1994Evaluating a Coppock-style rate of change as a bottom-regime filter
  27. 1995A weighted eleven-month Dow rate of change as one testable timing procedure
  28. 1996Named lookbacks, thresholds, and streaks for entry rules
  29. 1997A midpoint rate-of-change test for bond trend follow-through
  30. 1997Constructing a short-rate-adjusted equity momentum filter
  31. 1998Daily momentum rank-churn as a portfolio-construction problem
  32. 1999Constructing a lagged rate of change cycle system
  33. 2000A triple delay line then a one-bar elliptic oscillator
  34. 2001Confirming rate of change divergences with price
  35. 2001Momentum trendline breaks need price confirmation
  36. 2001Market breadth, On-balance volume, and Rate of Change as a combined timing framework
  37. 2001Know Sure Thing with stacked horizons and trendline confirmation
  38. 2003Constructing a mechanical system from a rate of change condition
  39. 2003Constructing momentum from two closes and spotting divergence
  40. 2003Formula choice tilts which momentum mismatches count as divergences
  41. 2004RSI and momentum agreement as an asymmetric filter
  42. 2005Constructing price-normalized moving-slope hybrids
  43. 2005Unsigned speed gates on a fixed average-cross pair
  44. 2007Rebuilding rate of change as a path-weighted oscillator
  45. 2008Construct Special K so short-horizon signals stay inside the primary trend
  46. 2013Restore volume balance before adding another price-time indicator
By fieldIndicators and filters682 readingsBy year1992115 readings
All 50 readings tagged Rate of Change
Also on Rate of Change5 readings
1988Five reading rules for smoothed indicator charts1992Four-window weighted rate-of-change composite1992Three-horizon KST maturity alignment1985Constructing excess and momentum difference-curve oscillators1989Momentum overlays that speed moving-average oscillators