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What is the KDJ indicator? What is the use of the KDJ indicator?

2022-03-24
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  When trading foreign exchange,it is essential to use indicators to watch the market.Some people are accustomed to using moving averages,some are used to using MACD,RIS indicators,etc.,and some only look at the K-line indicators.Similarly,the KDJ that I want to introduce to you today is also one of the most commonly used indicators in the foreign exchange market.KDJ is an auxiliary indicator derived from the moving average.On the basis of the moving average,it also adds the criteria for judging the market momentum and strength.It is mainly used to measure the degree of variation of the price outside the normal range.Once the price deviates from the normal market average price The value will correspond to a certain"overbought"and"oversold"area.According to the deviation rate rule of the moving average and the price regression principle,a buying point and a selling point will be formed.

  What is the KDJ indicator?

  The KDJ indicator,also known as the stochastic indicator,represents the randomness of the market,and it is also a very practical analytical indicator.It originated in the futures market at first,and its descendants are widely used in the stock market.Later,it was also fully popularized in the foreign exchange market.One of the most commonly used and indispensable indicators for traders.The principle of KDJ is to use real price fluctuations to reflect the comparison of the power of buyers and sellers in the market.It is clear at a glance which is stronger and weaker.It changes according to price changes,and the main research is between the highest price,the lowest price and the closing price.relationship between.This indicator is more suitable for short-term operations,and its characteristics can quickly,quickly and intuitively allow us to judge and understand market conditions,thereby creating timely buying and selling points.

  KJD stochastic indicator,its complete form is composed of 3 lines,namely K line,D line and J line,arranged in order from slow to fast,so the K line in KDJ is also called fast line,The D and J lines are called slow lines.As one of the oscillators,KDJ is mainly used to provide early warning prompts for the short-term long and short sentiment on the disk.It has the function of prompting overbought,oversold and golden crosses.Therefore,compared with other indicators,KDJ is more intuitive in prompting buying and selling points.

  However,it should be noted that the KDJ indicator on the foreign exchange platform has only 2 lines,that is,only the K line and the D line,so it is generally called the KD indicator,which can be understood as a simplified version of the KDJ indicator.This is due to the large transaction volume and high liquidity of the foreign exchange market,faster operation speed and more frequent trading opportunities.Therefore,removing a J line with the fastest running speed can reduce market noise,and the sensitivity of the indicator is also stable,but the basic There is no significant change in usage and KDJ.

  To insert this indicator method on MT4,you need to select"StochasticOscillator"in"Oscillator",the effect is as follows:

  (Screenshot of the mutual market MT4 trading system)

  The Chinese translation of"StochasticOscillator"is"Stochastic Oscillator",which is the KD indicator.The blue solid line is the K line,and the red dotted line is the D line.

  Regarding the parameters of the KD indicator,the default parameters of the general MT4 trading system are(5,3,3),generally the default parameters can be used,unless there are special needs to change,another group(8,5,3)It is a set of parameters used by many traders.Compared with the default(5,3,3)parameters of the system,this set of parameters is relatively less sensitive,and is more suitable for traders who pursue more stable opportunities.

  In addition to the parameters of the KD line,the indicator also has a running range area,which are 0,20,50,80,and 100.The system does not have a value of 50 by default,so you need to click to add the input value"50"in the indicator attribute level.,click to confirm and then a complete KD watch indicator is set.

  What is the use of the KDJ indicator?

  The KDJ indicator method is not complicated to use.It is generally divided into two parts,namely warning signals and trading signals,as follows.

  warning signal

  The warning signal is mainly judged according to the value range of the KD line.First,the interval of the KD indicator can be divided into four areas:(0-20),(20-50),(50-80),(80-100).The first one is the expected oversold zone,indicating that the price drop has deviated from the market average price at this time;the fourth one is the overbought zone,indicating that the price increase has deviated from the market average price;and the second and third can be considered as It is a low area and a high area.Once the KD double line fluctuates around the value of 50,it means that the market is in shock and has no direction.Usually,the KD line needs to enter the market value below 20 or above 80 to be considered an early warning.

  (Screenshot of the mutual market MT4 trading system)

  The above are the common ways to use the KD indicator,and there are some differences as to how close the KD value should be to be a warning signal.There are also a small number of conservative investors who set the limit to exceed 90 and lower than 15.Just like there are different reference boundaries for K and D values,the conditions are more demanding,and the more frequent the trading signals will be.Low,relatively more stable,so there is no clear certainty,mainly depends on personal trading habits,trading choices and trading expectations.

  But there is one thing to note,when the indicator enters the overbought or oversold area,it does not mean to send a short or long signal,but it needs to match the direction of the indicator,and also need to combine whether there are golden forks,dead forks,divergences and other signals.

  buy and sell signal

  1.Cross-trading method

  When the K line and the D line of the KD indicator cross,it is often a buying and selling signal.If the K line crosses the D line from bottom to top,a golden cross is formed.On the contrary,when the K line crosses the D line from top to bottom,a dead cross is formed.It should be noted that this trading point must be combined with the overbought and oversold areas.Only when a golden cross in the overbought area and a dead cross in the oversold area appear can it be regarded as a buy and sell signal,otherwise the success rate is low..

  Oversold zone golden cross

  (Screenshot of the mutual market MT4 trading system)

  As shown in the figure,the K line and the D line are below 20 at the same time,and the K line breaks through the D line to form a low-level golden cross,which is a buy point signal.At this time,it shows that the market bears are flourishing and declining,and the bulls are about to start a counterattack,and then the price rises all the way.There have been many golden crosses in the picture before the reversal,but if the principle of"buying after entering the oversold area and forming a golden cross"is not followed,there will be many wrong operations.Be careful of these pitfalls in actual combat.

  Overbought zone dead fork

  (Screenshot of the mutual market MT4 trading system)

  The K line and the D line are above 80 at the same time,and the K line crosses the D line downward to form a dead cross,which is a sell signal.It indicates that the multi-party forces in the market will be exhausted at this time,and the bears start to counterattack,and then the price falls all the way.

  2.Deviating from the law of sale

  Deviation,also known as divergence,refers to the trend that when the price is falling or rising,it keeps making new lows or new highs,and technical indicators do not follow the new lows or new highs,and there is a contrary trend,which is called divergence.

  Bottom divergence

  (Screenshot of the mutual market MT4 trading system)

  The price on the K-line chart fell,and the wave was lower than the wave,but the trend of the KD indicator did not follow the price decline,but instead was higher than the wave,forming a bottom divergence.The bottom divergence is generally a reversal signal,indicating that the market has diverged in the fall,and the short market is about to be reversed,which is a signal to buy and do more.

  (Screenshot of the mutual market MT4 trading system)

  The price on the K-line chart is rising,and the wave is higher than the wave,but the trend of the KD indicator does not follow the price rise,but is lower than the wave,forming a top divergence.The top divergence appears,indicating that the market has diverged in the rise,and the bull market is about to be reversed,which is a signal to sell short.

  3.Form trading method

  In addition to the above two trading rules,the price trend can also be judged according to the top and bottom patterns of the KD indicator.Common patterns include head and shoulders pattern,double head(bottom)pattern,triple top(bottom)pattern,and V-shape pattern.Wait.

  (Screenshot of the mutual market MT4 trading system)

  As shown in the figure,the KD indicator is running below the value of 20,and the trend of the KD curve shows a reversal pattern at the bottom of W,which is a reversal signal from weak to strong and double confirmation..The double bottom and triple bottom patterns are the process of the market bottoming out.Usually,the longer the bottom accumulates,the greater the increase will be.

  (Screenshot of the mutual market MT4 trading system)

  The KD indicator runs above the value of 80,and the trend of the KD curve shows a reversal pattern of double tops.And the triple top pattern is the process of building a top in the market.

  4.Resonance trading method

  Resonance is divided into time period resonance and multi-index resonance.Time period resonance means that when the long-period,medium-period and short-period graphs all converge to the same time point and the buying and selling direction of the KD indicator is the same,an upward or downward resonance will occur.The time point,the buy and sell signals that appear at this time have the highest success rate.

  Multi-indicator resonance means that when K-line,moving average,MACD indicator,RSI indicator,Bollinger Bands indicator and other technical indicators and KD indicator simultaneously issue buy or sell signals,the resonance point of technical analysis indicators will be generated.The success rate is also greatly improved.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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