Stochastic indicator on the chart there are three wires, K line, D
line and the J line. Stochastic calculations are taken into account in
the calculation period the highest price, lowest price, taking into
account the volatility of the random amplitude, so people think more
realistically reflect the random index fluctuations in stock prices,
which prompted more noticeable.
Stochastic significance of the line KD: KD line called the random
index, K index for the rapid, D for the slow target, break up when the
K line D line, expressed as an upward trend, you can buy; break down
when the K line D line, you can sell, and when KD value, said more
than 90 high rise, 20 fall below that low.
There is the possibility of too much down, but low prices have the
A, KDJ calculation
(N day closing price - N days Low) ¡Â (N days, the highest price - N
days Low) ¡Á 100 = N at RSV
K = 1 day / 3 day RSV + 2 / 3 before the 1 K value;
Date D = 2 / 3 before the 1 D values + 1 / 3 day K value;
The day J = 3 K value of the day - 2 day D value.
K, D to take the initial value of 50.
Second, KDJ principle
1, KDJ to today's closing price (that is N days since the final words
and the price of both long and short) as the hard to buy the balance
of force and point to the lowest closing price less the price of
purchasing power from the characterization of the size and the highest
price of the following Characterization of the lowest prices to the
sale of power from the total force. This, RSV's purchasing power and
the ratio of the total force, N days since it is used to describe the
size of the market to buy power ratio, reflecting the market's
2, KDJ targets were later revised to give up directly as a K value of
the RSV, but only to RSV as the new K value inside the 1 / 3 ratio of
the content. This is a weight handling, suggesting that more attention
(2 / 3 value) the role of recent trends.
3, George. Lang in the invention, D is the original value of N at the
average K value of the smoothing. Are directly visible from the
formula, D values for only the K value of 1 / 3 the weight to be
considered, the same attention that the recent trend. At the same
time, D value also less than the rate of change of rate of change of K
value, therefore, K lines become more sensitive indicators were the
fast line, D line was more calm slow line.
4, J value is intended for the K D value and the value of a deviation,
coefficient of 3 and 2 also show the weight of the treatment,
indicating that KD indicators, D should be more emphasis on a number
of indicators, trend analysis, which compared with that slow line show
a trend of sexual principle is the same.
Third, KDJ application
1, in general, D line from the next buy signal for the switch from the
switch under the sell signal.
2, KD in the range of 0 to 100 wave, 50 for the balance of long and
short lines. If in a multi-market support line 50 is retreated; if the
market in the short side, 50 is the rebound pressure line.
3, K line in the low line on the buy signal through D, K D line in the
high wear line is sold under the signal.
4, K wire into the overbought zone above 90, 10 The following is the
oversold zone; D line into the overbought zone above 80, 20 The
following is the oversold zone. Should pay attention to the trading
5, high-end line of the M-shaped zone D is common at the top to form
the second line of the head appears, and K D line beneath the second
is the sell signal. D line of low-grade area is a common W-shaped
bottom to form the second line the bottom of the second time, and K D
on the line when wearing a buy signal. M-shaped or W-shaped second
appears, if the price trend occurred with the departure from, referred
to as "top-divergence" and "the end of
divergence", the sale of signal reliability is very high.
6, J value can be greater than or less than 100 KD 0.J buy and sell
signals based on the indicators can take action to provide a credible
judge. Normally, when J is greater than 100 or less than 10 is
considered the timing of actions taken by trading.
7, KDJ is essentially a stochastic volatility index, so the
calculation formula of the N values are generally smaller value to 5
to 14 is appropriate, based on the characteristics of the market or
commodity selection. However, the KDJ applied weekly or monthly
charts, but also can be used as a tool for long-term forecast.
KDJ and the integrated use of Bollinger Bands
KDJ indicator is overbought and oversold indicators, Bollinger Bands
are supporting pressure categories of indicators. Combination of the
two advantages: the signal can make more precise KDJ index, while
prices at the K line of the Bollinger Bands indicator system
indicator, the price often reflects the trends in the medium-term
operation, thus using the two indicators to determine the short-term
fluctuations in price in the end, or mid-term fluctuations play a
role, especially for the price in the end determine the short-term
peak (bottom), or into the medium term is up (down), with fairly good
We know Bollinger in a pressure on the rail, the rail and lower rails
are supported (pressure) effect, so when prices fell to a Boolean or
rail line to the downside, you can ignore the signal indicators KDJ to
take action. Of course, if you come to the low KDJ indicator, then the
short-term trends should be regarded as mutual authentication with the
medium-term trend of the results of the operation to take a more
But note that when the price fell to Bryn rail line, even if there are
support and stabilization, KDJ indicators also rose simultaneously,
you can turn the signal trend has been issued, it is only up to grab a
rebound. KDJ 80 when the index took into high gear and take action to
sell more appropriate, because when the stock price fell below the
Bollinger Bands will lead to Bollinger in the opening track narrowed,
at least at this time to fix targets for a longer time consolidation,
so that the downside risk in terms of prevention, or from the point of
view to consider the opportunity cost of holding, are not appropriate
to continue to hold.
Finally, to conclude the comprehensive use of KDJ indicator and
Bollinger Bands indicator principle: that is, Bollinger Bands based on
the price movements to determine the center line to KDJ indicators,
supplemented by short-term price trend judgments, KDJ indicator
trading signals issued Bollinger Bands need to verify with, if both
are given the same instruction, then the sale of high accuracy.
Fourth, technical indicators Summary
Many investors tend to use the index generated in the process
wondering: sometimes heavily overbought indicators, the price has
continued to rise; sometimes passive indicators in oversold area and
prices have not stabilized several weeks to stabilize. In fact,
investors confused here, the relationship between indicator and price.
Can not determine the market trend indicators, the price index itself,
decided to run the state. Price is a result of the indicator is a
result, due to be launched by the fruit, from fruit to abduction is
the cart before the horse. In fact, the most effective form of
expression is the market behavior, investors should first be analyzed
from a technical form of psychological changes of market participants
and subject to the market. Before the trend has not changed in the ups
and downs, do not try to use overbought indicators, oversold, or
passivation to blindly determine the market rebound, the callback was.
We should make flexible use of technical indicators, to fully play its
role of supporting information
Fifth, how to reverse application KDJ
KDJ  is a quite real sense of the technical indicators, many
investors like to use this indicator, especially short-term trading,
often KDJ in and out of practice, but often the main guessed the
general investor psychology, reverse operation, that it is very easy
to follow suit and offer short-term customers and cleaning out.
ST Gold Disk is a long period of weak stock. The company is located in
Hainan, the main zone integrated development, construction and
management of losses in 2001 because the company in accordance with
state regulations, the implementation of the Ministry of Finance
issued a new accounting system, so that the funds return to the real
value of the company, exist to resolve the underlying factors inflated
assets, the assets related items for the full impairment of assets, in
the process, the stock falling, (collection of articles by the search
unit in China finishing) to November 27, 2002 a low of 4.20 yuan, the
unit pulled out a small shrinkage Yang, December 5 KDJ daily stock
peaked and have signs of passivation, and its stock price started
shaking up and down, up 4.82 yuan the day, the minimum 4.63 yuan, in
general, , the short-term visitors have to leave at this time, I did
not expect the stock for 3 days after short-term hit a new high, the
bottom phase characteristic is very obvious. In fact, the main line is
the use of KDJ at any time to give people the feeling of a callback,
so that investors do not dare for fear of holding the callback.
Appropriate here to remind that it is relevant, a look at the daily
stock peaked KDJ whether abnormal heavy volume, abnormal heavy volume
should be avoided. Second, whether the location to see the next day to
close at its high Yangxian position, closing the day before the
general physical location of its Yangxian half as good, three other
technical indicators to see whether there are signs of strength, ST
gold plate in the Dec. 4 when M ACD just Jin Cha, so at that time the
holder to buy the stock is a bargain right.
KDJ stock picking
KDJ on line is a sensitive indicator of changes fast, random strong,
Buy, sell signal, so that investors buy and sell signals based on
their dealings issued when the loss. The use of weekly and daily KDJ
KDJ Jin Cha common stock selection method to filter out false buy
signal, the successful bid to find high-quality signal.
Weekly and daily KDJ KDJ common Jin Cha choose to buy stock picking
method are summarized as follows:
The first purchase method: play lead and buy law.
In practice, often encounter this problem: As the rate of change in
daily KDJ KDJ faster than weekly, as weekly KDJ Jin Cha, the daily
MACD KDJ has a few days in advance, the stock has risen some, to buy
into the cost has been raised. Aggressive investors can beat the
amount of buying in advance, in order to reduce costs.
Law to play ahead of quantity purchased to meet the requirements: ¢Ù
closing weeks of Yang Xian, weekly K, J hook the two lines about to
head to MACD (not Jin Cha). ¢Ú daily KDJ development in this week Jin
Cha, Jin Cha Yang Xian on heavy volume received (if Date Line KDJ Jin
Cha day, the day average daily volume turnover of more than 5.)
The second purchase method: Weekly KDJ Gang Jin Cha, Jin Cha daily KDJ
has bought law.
Buy a third method: the weekly K, D two lines "to Sibu Si"
To meet the conditions for this are: ¢Ù weeks KDJ Jin Cha, the stock
retreated closing weeks Yinxian, then heavy volume upward. ¢Ú weekly K,
D two lines will be Sicha, but did not really happen Sicha, K line to
re-open mouth upstream. ¢Û daily KDJ Jin Cha. Use this method to buy
stocks, you can capture the rapid rise in the stock market strong.
 Previously we have discussed short-term fluctuations in price are
the technical specifications of the parameters, not related to the
topics to be discussed: the price fluctuations in the medium and
long-term technical indicators do not need to re-set the parameters?
The answer is yes, because the more mature market, the more the need
for long-term price of track and analyze trends.
China's stock market from early 1998, there's a very obvious change,
that is, institutional funds on the stock and extended running time,
the market also will be operating philosophy has undergone great
changes. We find that the market emerged in the great bull stock
continued its bull market is often a year or two years, which shows
that we need to focus on long-term price movements to study them. Now
a lot of analysis software cycle of price changes, including: at line
(K line of 5-60 minutes), weekly, monthly line. While on line best
reflects the long-term price movements, but because of China's stock
market set up time is only about a decade, a number of shares times
the stock price in particular can provide information on line is very
small, while the weekly is a very good tool. Here we cut to the
current topic, that is, setting the weekly technical indicators. We
first discuss the issue most familiar KDJ indicator.
Analysis software in general tend to week KDJ indicator K line
parameter is set to 9, this is not the best choice? I remember our
discussions on parameter setting daily targets had the parameters of
the target from 9 to 19, this time to do the same would happen?
By contrast observation of the two parameters, we can find a common
feature, namely that out of the big bull market in stocks, the weekly
index K line KDJ have oversold zone at 20 or less (usually the
location of the 10 to 15 ) occurred in the gold cross, but with a 9
KDJ indicator as the parameter, compared to 19 for the parameters of
the KDJ more accurate indicators, specifically in the large Ushimata
KDJ 9 indicators for the parameters, often in the index not fall back
to 20 the following appeared in oversold area market, some even to 50
near the central axis are in direct quotes, if we follow the principle
of KDJ indicator to operate the application may miss the opportunity.
But 19 weeks for the parameters K line KDJ indicators, most of the
strong stock, usually the index price has not been started in the
following areas before the emergence of 20 gold cross, and some will
cross twice, and in the event of Golden Cross, will basically form a
considerable increase in the K line of 20 the following week of
cross-KDJ indicator, the stock almost have constituted a necessary
condition for the bull market. Similarly, in overbought zone above 80
Sicha, in terms of price movements is fatal.
But the other hand, for the parameters of the Week of 9 KDJ indicator
has its advantages, that is, its sensitivity is relatively high,
generally speaking, when the price trend is in the high when the judge
has turned, we need the help of this parameter set of indicators to 19
as a parameter for the perimeter of the main features of KDJ indicator
is signaling a more reliable, but the signal is somewhat lagging
behind the top flight. Therefore, we use weekly KDJ indicators, one
should pay attention to the parameters set; second, to flexibility, at
different times, different stocks of several parameters should be set
up more to try to verify its reliability, discussed here set method
only two kinds of settings in many ways is not part of it, does not
apply to all of the stock and any time. In addition, just over the
right addition to stocks, the weekly index KDJ distortion of the index
will be generated, which is the inherent flaw of many technical