In the toolkit of technical analysis, the KDJ indicator has become a "powerful weapon" among traders due to its efficient signal capturing ability. Many investors, when learning stock or crypto asset trading, focus on mastering this indicator. So, why is the KDJ indicator so widely used? What is the underlying logic behind its operation? This article will analyze the practical application of the KDJ indicator in trading from multiple perspectives.
Core Principles of the KDJ Indicator and Its Three Lines
The KDJ indicator is a type of stochastic indicator that reflects overbought and oversold conditions in the market through mathematical calculations. It consists of three lines: the K line (fast line), the D line (slow line), and the J line (direction-sensitive line).
Among them, the primary functions of the K and D lines are to identify overbought or oversold phenomena, similar to the RSI indicator. The J line is used to measure the deviation between the K and D lines. When the three lines intersect, it often signals a new trading opportunity.