How much do you know about KDJ index and how to apply it in actual combat
KDJ index, as an analysis tool familiar and understood by technical financial investors, is favored by investors. When we use KDJ index, we should know the logic and composition of KDJ index.
KDJ index can also be called random index. By introducing the concept of fast and slow moving average, KDJ index calculates the fluctuation of the highest price, the lowest price and the closing price in time, reflecting the strength of the price trend and the dynamics of overbought and oversold.
KDJ index is composed of K value, D value and J value. K value and D value range from 0 to 100, and J value range from 0 to 120. In the use of the market, KDJ is generally divided into three areas: overbought area, oversold area and wandering area. Let's share with you how to use KDJ indicators in actual combat and explain the three areas separately.
1. Overbought area: (KDJ) values are beyond the range of 80, which indicates that there are many short-term sell-off pressure plates. Some investors who buy at a low price or recover the principal will consider selling or stop earning out, and they are not suitable to buy in the short term, which is a sell signal.
2. Oversold area: (KDJ) values are all below 20, indicating that there are more short-term holders or buyers, and they are in the period of building positions, and institutions and main forces are buying more in the short term. Short term is not suitable to sell, investors should hold shares and wait for the opportunity of recovery.
3. Wandering area: (KDJ) value is in the range of 20-80, which indicates that the holding time is at this time. If the holding time does not fall below 20, you can not consider adding positions. If the holding time does not exceed 80, you can consider not selling and wait for the formation of trading opportunities.
But any index has limitations, KDJ index also has defects, in the unilateral downward and unilateral upward trend, investors will sell or buy ahead of time, and some ineffective golden forks and dead forks will be formed. Therefore, I hope that investors should judge the technical indicators according to the current market environment and market conditions. The above analysis is helpful for investors to understand KDJ indicators.