K-line form and foreign exchange trading: how to use KDJ index
KDJ index, also known as random index, is a quite new and practical technical analysis index. Like RSI index and MACD index, KDJ index is commonly used by investors in technical analysis. Next, I will explain how to use KDJ index for you.
KDJ index is three curves, which are mainly considered from five aspects: the absolute number of Kd value; the shape of KD curve; the intersection of KD index; the deviation of KD index; the value of index.
There are three rules of application:
First, the value of KD is considered. Kd values range from 0 to 100, which can be divided into several regions: overbought areas are above 80, oversold areas are below 20, and the rest are wandering areas.
According to this classification, KD over 80 should be considered to sell, below 20 should be considered to buy. It should be noted that the above-mentioned division is only a preliminary process of applying KD index, which is only a signal. It is easy to cause loss if we operate completely according to this method.
Secondly, the shape of KD index curve is considered. When KD index forms a head shoulder shape and multiple tops (bottoms) at a higher or lower position, it is a signal to take action. The higher or lower the position, the more reliable the conclusion.
Thirdly, from the cross of KD index. The relationship between K and D is just like the relationship between stock price and ma. There are also death cross and gold cross. However, the application of cross here is very complicated and there are many other conditions attached.
Take K from the bottom up and cross D as an example: K through D is a golden cross, a buy signal. But whether golden fork should buy or not depends on other conditions.
The first condition is that the position of golden fork should be relatively low, which is in the oversold area. The lower the position, the better.
The second condition is the number of times it intersects D. Sometimes in the low position, K and D cross back and forth several times. The minimum number of crossing is 2, the more the better.
The third condition is the position of the intersection point relative to the low point of the KD line, which is often called the "right side intersection" principle. K intersects with d only when D has risen up, which is much more reliable than when D is still descending.
Fourth, consider the deviation of KD 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.
Fifthly, if the value of J index exceeds 100 and is lower than 0, they belong to the abnormal area of price. If the value is greater than 100, it is overbought, and if it is small, it is oversold.
It is necessary to master the commonly used technical analysis indicators in foreign exchange trading. Investors can make a simple prediction on the future trend of K line according to the commonly used analysis indicators, so as to make clear their investment direction.