What is the KDJ indicator and how to take advantage of it in your trades?

The KDJ indicator, a fascinating technical analysis tool that I have been using lately, has surprised me with its ability to analyze price movements and identify potential trends in the markets. Derived from the Stochastic Oscillator but with the addition of the J line, it provides trading signals that, in my experience, are quite accurate.

When I analyze this indicator, I focus on its three main components:

• The K line: reflects rapid price movements like a lightning bolt.
• The D line: slower, acts as a moving average of K and helps me confirm signals
• The J line: the most volatile, shows the intraday strength of the market

When interpreting the KDJ, I pay special attention to:

The crosses between lines - I have noticed that when K crosses D from below, it is usually a buying moment. And when it crosses from above, it is a selling moment.

Extreme zones also tell me a lot - values above 80 suggest overbought (watch out for a possible drop!), while below 20 indicates oversold (a bounce could come).

The J line is my favorite - when it sharply diverges from K and D, it almost always anticipates a reversal.

Regarding the configuration, although the standard is (,3,3), I have experimented with:

• (5,3,3) for my quick operations
• (9,3,3) when I seek balance
• (14+,3,3) to analyze long trends

In my daily trading, I use the KDJ for:

Determine trends - when K and D rise together, I see bullish opportunities; when they drop, I prepare short positions.

Confirm reversals - monitoring how K and D interact with J.

Look for divergences - these have saved me from many failed trades. If the price makes higher highs but the KDJ does not follow, I prepare for a possible drop.

In practice, my best entries have been when:

• K crosses D from below near the level 20 with J accelerating upwards
• K crosses D from above near the 80 level with J plummeting

My personal advice: never rely solely on the KDJ. I combine it with trend lines and moving averages. In sideways markets, it has given me some false signals that cost me money. Experiment with different settings based on your preferred time frame.

Have you used the KDJ in your trading? Do you find it really useful or do you prefer other indicators? Share your experience, I am interested in knowing other approaches.