What is the KDJ index?
The full name of KDJ is stochastics, which was created by Dr. George Lane of the United States. It combines the advantages of momentum concept, strength index and moving average. It is also a common technical analysis tool in European and American Securities and futures markets. The design idea and calculation formula of random index originated from William (WR) theory, but it is more valuable than WR index. The WR index is generally only used to judge the overbought and oversold of stocks, while the random index integrates the idea of moving average, so it is more accurate to judge the buying and selling signals. Let's take a look at KDJ indicators in detail? And how do we use this indicator?
1、 Stop loss strategy of KDJ index
1. The value of KDJ index
KDJ index value range: in KDJ index, K value and D value range are 0 ~ 100, while J value range can be more than 100 and less than 0. Generally speaking, over 80 is overbought area, below 20 is oversold area, and the rest is wandering area. When the three values of K, D and j are near 50, it means that the strength of both sides is balanced; when the three values of K, D and j are all greater than 50, it means that the multi-party forces are dominant; when the three values of K, D and j are all less than 50, it means that the air side is dominant. KD over 80 should be considered to sell, below 20 should be considered to buy.
If the value of J in the KDJ index is negative, stop loss will be set at 3% of the lowest point on the day of purchase for those who buy on the same day; if the price is delayed for 1-3 days, stop loss will be set at the lowest point of the period when the stock price enters the buying area (several days after the negative value of J and the day of purchase), and if it falls below, stop loss will be set. If the hands of the stock down to a recent low, also consider stop loss, if unexpected limit, you must stop on the limit board.
2. The death of KDJ curve
When the stock price has gone up for a long time in the early stage and the increase has been great, once the j line and K line break through the D line at the high level (above 80), it indicates that the stock market is about to turn from strong to weak, and the stock price will fall sharply. Most stocks should be sold at this time, which is a form of "dead cross" in the KDJ index.
When the stock price falls for a period of time, there is no power to rebound upward, and all kinds of moving average exert strong pressure on the stock price, KDJ curve still fails to return to above 80 after a short rebound near line 80. If line j and line k break through line D again, it indicates that the stock market will again enter an extremely weak position, and the stock price will fall. You can sell the stock or wait and see, which is the KDJ index Another form of death crossover.
3. Deviation of KDJ curve
When the trend of stock price K-line is higher than one peak, the stock price keeps going up, while the trend of KDJ index is higher than that of KDJ, which is the phenomenon of top deviation. Top deviation is generally a signal that the stock price will turn high, indicating that the stock price is about to fall in the short and medium term, and it is a signal to sell. Considering the deviation of KDJ index. If KD is in a high or low position, it is a signal to take action if it deviates from the stock price trend.
When the stock price is at a high level and KDJ has a top deviation above 80, it can be considered that the stock price is about to reverse downward, and investors can sell in time; when the stock price is low and KDJ is also low (below 50), the bottom deviation can only be confirmed after several times of repeated bottom deviation, and investors can only do strategic position building or short-term investment.
4. The shape of KDJ index curve
Considering the shape of KD index curve. When KD index forms head shoulder top and multiple top (bottom) at higher or lower position, it is a signal to take action. The higher or lower the position, the more reliable the conclusion.
When the KDJ curve is higher than 50, if the trend of KDJ curve forms the top reversal form of M head or triple top, it may indicate that the stock price will change from strong to weak, and the stock price will fall sharply, so the stock should be sold in time. If the curve of stock price has the same shape, it can be more confirmed, and its decline can be judged by the morphological theory of M head or triple top.
2、 Operation precautions of KDJ index
The use of KDJ only exists as an auxiliary means. Investors should refer to the K-line combination of stock price, volume price relationship, trend pattern and KDJ index to study and judge. When the trading signals they send tend to be consistent, such trading signals are more reliable.
KDJ is a relatively robust, relatively high probability of success and relatively small stop loss opportunity. This method is suitable for beginners and investors who don't have much time to look at stocks, but it doesn't mean there is no risk in application. When the buying trend is inconsistent with the operator's expectation, stop loss should still be considered.
In short, the stock market is a zero sum game market. If some people make profits from it, others will naturally lose money. It is quite difficult to grow from a new stock market player to a stock market expert who can keep profits for a long time. Therefore, we need to think more, learn more, master the theory in the study, and understand the market in practice.