Among the three curves of the KDJ indicator, the J line fluctuates most frequently, followed by the K line, and the D line fluctuates least frequently.
In the design process, the KDJ indicator mainly studies the relationship between the highest price, the lowest price and the closing price. It also integrates some advantages of the momentum concept, strength indicator and moving average. Therefore, it can analyze and judge the market relatively quickly, quickly and intuitively, and is widely used in short- and medium-term trend analysis of the stock market. It is the most commonly used technical analysis tool in the futures and stock markets.
Since the KDJ line is essentially a concept of random fluctuations, it is more accurate for grasping the short- and medium-term market trends. However, on the longer-period K-line chart, KDJ also has certain significance in predicting the mid- to long-term trend of stock prices. For example, the KDJ indicator in the weekly chart has a better guiding effect on mid-line operations.
In the KDJ indicator, the value range of K value and D value is 0-100, while the value range of J value can be more than 100 and less than 0, but the range of KDJ judgment on the analysis software is 0-100. Generally speaking, in terms of sensitivity, the J value is the strongest, followed by the K value, and the D value is the slowest. In terms of safety, the J value is the worst, followed by the K value, and the D value is the most stable.
KDJ basic application points:
1. When the weekly J line ticks upward below 0 and closes the Zhou Yang K line, the goddess of opportunity will come and you can buy in batches. This is especially true in a bull market where the stock price is running above the 60-week moving average.
2. In a short market where the stock price runs below the 60-week moving average, the weekly J-line often becomes passivated below the 0 value. At this time, do not take buying action immediately, but wait patiently for the weekly J-line to hook upward and close the weekly Yang line. before buying.
3. When the weekly J-line rises above 100 and turns downwards and closes the weekly Yin K-line, you should be alert to the appearance of a top and reduce the weight first. This is especially true in the short market where the stock price is running below the 60-week moving average.
4. In a bull market where the stock price is running above the 60-week moving average, the weekly J-line will often become passivated when it is above 100. At this time, do not take selling action immediately, but wait patiently for the weekly J-line to hook downward and close out of the weekly Yin K The line can take selling action.
Investors need to pay attention to the following two points when applying the KDJ indicator:
(1) The KDJ indicator is a short-term technical indicator, suitable for analyzing stock price trends in a short period. If you want to analyze longer-term stock price trends, investors can use the weekly-level KDJ indicator.
(2) The KDJ indicator is suitable for giving buying and selling signals in volatile market conditions. Once the stock price enters a unilateral rise or fall trend, the KDJ indicator will be blunted. The passivated KDJ indicator can no longer send out valid buying and selling signals.
General principles:
1. If D% is greater than 80, the market indicates overbought; if D% is less than 0, the market indicates oversold.
2. If J% is greater than 100, the market indicates overbought; if J%<10, the market indicates oversold.
3. KD Golden Cross: K% crosses D% upward, which can be regarded as a buying signal.
4. KD dead cross: K% falls below D%, which can be regarded as a sell signal.
Parameters of KDJ indicator:
In general analysis software, the system default parameter of KDJ indicator is 9. From a practical point of view, the daily K-line KDJ indicator set by this parameter has the defects of frequent fluctuations, being too sensitive, and having many invalid signals. Because of this, the KDJ indicator is often ignored by market participants.
I think this indicator does not have much value. But in fact, if we modify the parameters of the KDJ indicator, we can find that this indicator still has a relatively good effect on studying and judging price trends. Based on experience, select one of the following values for the KDJ indicator parameter of the daily K-line.
All have relatively good use effects: 5, 19, 25. Users can flexibly set the parameters of this indicator according to different stocks and different time periods.
When the K value is higher than the 80 overbought zone, the short-term stock price is prone to fall back; when it is lower than the 20 oversold zone, the short-term stock price is prone to rebound upward.
However, there are also various "flaws" in the actual use of KDJ. For example: after the K value enters the overbought or oversold zone, it often wanders and "passivates", leaving investors at a loss; the stock price fluctuates violently in the short term or the market fluctuates instantaneously. When the KD value cross signal is used to trade, the dilemma of buying at a high point and selling at a low point often occurs.
1. If the J value is greater than 100, especially if it is greater than 100 for 3 consecutive days, the stock price will often have a short-term head;
2. If the J value is less than 0, especially if it is less than 0 for 3 consecutive days, the stock price will often reach a short-term bottom again. Investors should note that the J-value signal does not appear often, but once it appears, its reliability is quite high. Around us, there are many experienced old investors who are specifically looking for J-value signals to grasp the best buying and selling points of stocks, and this signal can be said to be the essence of the KDJ indicator. #BTC #ETH #crypto2023
