KDJ

The KDJ indicator is a stochastic oscillator. It mainly uses the true amplitude of price fluctuations to reflect the strength of price trends and overbought and oversold phenomena, and is a technical tool that sends buying and selling signals before prices rise or fall.

The KDJ indicator consists of three lines, namely K line, D line and J line. They form a point on the coordinates of the indicator and connect countless such points to form a complete KDJ indicator that can reflect the price fluctuation trend.

K line: Also called the quick confirmation line, it is the line with the highest sensitivity to price trends and reflects the current trend of the market.

D line: Also called the slow main line, it is a smooth processing of the K line and reflects the mid-term trend of the market.

J line: Also called direction sensitive line, it is a comprehensive consideration of K line and D line, reflecting the short-term trend of the market.

How to calculate KDJ indicator?

The calculation of KDJ indicator is more complicated. First, you need to select the period (n days, n weeks, etc.), then calculate the immature random value (i.e. RSV value) of the day, and then calculate the K value, D value, J value, etc.

RSV value

The RSV value is an immature random value that reflects the relative position of the day's closing price within a certain period. Its calculation formula is:

RSV=Hn−LnC−Ln×100

formula:

C is the closing price of the day;

Ln is the lowest price in the previous n days;

Hn is the highest price in the previous n days.

RSV values range from 0 to 100. When the RSV value is close to 100, it means that the closing price of the day is close to the highest price in the cycle, reflecting the strength of the market; when the RSV value is close to 0, it means that the closing price of the day is close to the lowest price of the cycle, reflecting the weakness of the market.

K value

The K value is a quick confirmation line obtained by smoothing the RSV value. Its calculation formula is:

K=32Ki−1+31RSVi

formula:

Ki and RSVi represent the K value and RSV value of a certain day respectively;

Ki-1 represents the K value of the previous day. If there is no K value of the previous day, 50 is used instead.

The K value also ranges from 0 to 100. The higher the K value, the stronger the market; the lower the K value, the weaker the market.

D value

The D value is the slow trunk line obtained by smoothing the K value. Its calculation formula is:

D=32Di−1+31Ki

formula:

Di and Ki represent the D value and K value of the day respectively;

Di-1 represents the D value of the previous day. If there is no D value of the previous day, 50 is used instead.

The D value also ranges from 0 to 100. The higher the D value, the stronger the market; the lower the D value, the weaker the market.

J value

The J value is the direction sensitive line obtained by comprehensively considering the K value and D value. Its calculation formula is:

J=3K−2D

formula:

J, K, and D represent the J value, K value, and D value of the day respectively.

The J value can be negative or exceed 100. The higher the J value, the stronger the market; the lower the J value, the weaker the market.

What does the KDJ indicator mean?

The KDJ indicator can not only reflect the degree of overbought and oversold in the market, but can also send out buying and selling signals through cross breakthroughs. Specifically, there are the following situations:

Overbought and oversold

When the K line and D line are both above 80, it means the market is overbought and the stock price may fall; when the K line and D line are both below 20, it means the market is oversold and the stock price may rebound. At this time, you can adjust your position appropriately and reduce or increase your holdings.

golden fork and dead fork

When the K line breaks through the D line from bottom to top, a golden cross is formed, which is a buy signal; when the K line falls below the D line from top to bottom, a dead cross is formed, which is a sell signal. At this time, the strength of buying and selling can be judged based on the position and angle of the intersection.

divergence

When the stock price reaches a new high or a new low, but the KDJ indicator does not reach a new high or a new low simultaneously, a divergence occurs. This is a sign of a turnaround. When the stock price hits a new high but the KDJ indicator does not hit a new high, a top divergence is formed, which is a sell signal; when the stock price hits a new low but the KDJ indicator does not hit a new low, a bottom divergence is formed, which is a buy signal.

slope change

When the rising or falling speed of the K line and D line weakens, the slope tends to be gentle, which is an early warning signal for a short-term trend change. At this time, you can pay close attention to changes in stock prices and indicators and take countermeasures.

Summarize

The stock KDJ indicator is a stochastic oscillator. It mainly uses the true amplitude of price fluctuations to reflect the strength of price trends and overbought and oversold phenomena, and is a technical tool that sends buy and sell signals before prices rise or fall. It consists of three lines: K line, D line and J line. They form a point on the coordinates of the indicator and connect countless such points to form a complete KDJ indicator that can reflect the price fluctuation trend.