What is KDJ indicator?

KDJ indicator, also known as stochastic indicator, is an overbought and oversold indicator. It was originally used for futures market analysis, and later widely used for short-term and medium-term trend analysis of the stock market. It is a widely used technical analysis tool in futures and stock markets.

KDJ indicator history:

KDJ indicator was first developed on the basis of William indicator, but William indicator only judges the overbought and oversold phenomenon of stocks, while KDJ indicator combines the concept of moving average to form a trading signal with certain reference value.

how to look at the KDJ line:

KDJ indicator is composed of k value, d value and j value. In trading software, it is often drawn into white, yellow and purple curves according to the k value, d value and j value of each cycle, forming various forms, which is of certain value for grasping the market trend in the short and medium term. The design and verification of triggered fund fixed investment based on KDJ and MACD indicators use the highest price, lowest price and closing price as the main data, and combine some advantages of momentum concept, strength index and moving average in the calculation process. First, the immature random value RSV of the last period is calculated through the highest price, lowest price and closing price of the last period, and then the K value, D value and J value are calculated according to smma's method, and then drawn into a three-color curve to be intuitive.

first, consider the value of KD. The value range of KD is ~ 1, and it is divided into several areas: over 8 is overbought area, below 2 is overbought area, and the rest is wandering area. According to this classification, if KD exceeds 8, you should consider selling, and if it is below 2, you should consider buying. It should be explained that the above division is only a preliminary process of applying KD index, which is only a signal, and it is easy to incur losses if it is completely operated in this way.

second, consider from the form of KD index curve. When the KD index forms a head-shoulder shape and multiple tops (bottoms) at a higher or lower position, it is a signal to take action. Note that these forms must appear in a higher or lower position. The higher or lower the position, the more reliable the conclusion.

thirdly, consider from the intersection of KD indicators. The relationship between K and D, like the relationship between stock price and MA, also has the problems of death crossover and gold crossover, but the application of crossover here is very complicated, and there are many other conditions attached. Take the intersection of K and D from bottom to top as an example: K crossing D is a golden cross, which is a buying signal. However, whether the golden fork should be bought or not depends on other conditions. The first condition is that the position of the golden fork should be relatively low, especially in the oversold area. The lower the better. The second condition is the number of intersections with d. Sometimes in the low position, K and D have to cross back and forth several times. The minimum number of crossings is 2, and the more, the better. The third condition is the position of the intersection relative to the low point of KD line, which is often referred to as the principle of "right intersection". K only intersects with D when D is looking up, which is much more reliable than when D is still falling.

fourthly, consider from the deviation of KD index. If KD is at a high or low level, it is a signal to take action if it deviates from the trend of stock price.

fifthly, if the value of the J indicator exceeds 1 and is lower than , it belongs to the abnormal price area; if it is greater than 1, it is overbought; if it is smaller than , it is oversold. You can judge it together with other indicators, such as MACD indicator.