Basic introduction of KD index
The Chinese name of KD index is stochastics, which originated from the futures market. Since the American master Dr. george ryan founded the Random Index (KD) in 1950s, KD has been proved to be an admirable classic for half a century.
Stochastics (KD) is suitable for technical analysis of short and medium-term stocks. Compared with the moving average, the random concept of KD line has its own advantages. Traditionally, the moving average is only calculated by the closing price, so it can't show the real fluctuation of a market. In other words, the highest and lowest prices of the day or in recent days cannot be reflected in the moving average. Therefore, some experts have gradually created some more advanced technical theories and fully played the role of the moving average. The KD line is one of the representative works.
Analysis premise of KD index
First of all, we need to explain the basic premise of technical analysis: the trend is inertial, whether it is rising or falling, once it starts, it will last for a while until it turns again. So there are only two things we need to do: the first is to identify the trend, and the second is to find the turning point of the trend? What needs special explanation is that the inflection point is found after the inflection point of the trend, not the inflection point of the forecast trend. Most of the analytical tools we use are based on following trends. In practice, many people use these tools to predict trends, which is undoubtedly wrong because it has no such function.
Calculation formula of KD index
1, immature random value (RSV)= (closing price-lowest price in n days)/(highest price in n days-lowest price in n days) * 100.
2.M 1 moving average K=RSV.
3. M2 daily moving average with d = k
4. The parameter n is set to the 9th, the parameter M 1 is set to the 3rd, and the parameter M2 is set to the 3rd.