Guys, I want to share something about the KDJ that significantly changed my trading approach. This indicator is somewhat underrated by many people, but once you truly understand how it works, it opens many doors.

The KDJ works with three lines: J is the most sensitive and keeps jumping all the time, K is intermediate, and D is the slowest and most reliable. Basically, the indicator studies the relationship between the highest price, lowest price, and closing price. It combines concepts of momentum, strength, and moving averages, so it can effectively capture short- and medium-term trends.

Now, most people use the KDJ with the system's default parameters, which is 9. But here’s the problem: with that value, the indicator becomes too sensitive, generates too many invalid signals, and people end up ignoring it. I tested here and found that adjusting to values like 5, 19, or 25 makes the indicator work much better. It depends on the asset and the timeframe, but it’s worth testing.

The basic concepts everyone knows: when K crosses above D, it’s a buy signal; when it drops below, it’s a sell signal. If D surpasses 80, it indicates overbought; below 20, it indicates oversold. All very logical. But the truth is that the KDJ has several tricks.

For example, after K enters the overbought or oversold zone, it tends to wander there, kind of stuck, and you get trapped in a position with a loss. Or the crossover signal might have you buying at the top and selling at the bottom. This happens quite often.

But there is a signal that really works: the J value. If J rises above 100, especially if it stays above 100 for three consecutive days, there’s a high chance of forming a short-term top. The reverse is also true: J below 0 for three days in a row usually marks a bottom. This signal doesn’t appear all the time, but when it does, its reliability is very high. The experienced traders I know specifically look for these J signals, considering them almost the essence of the KDJ.

An important thing: the KDJ is really good for short- and medium-term trading. If you want to see long-term trends, use the KDJ on the weekly timeframe, which works much better. And be careful when the price enters a very strong uptrend or downtrend; the indicator becomes dull and stops giving valid signals.

That’s basically it. The KDJ isn’t perfect, but if you adjust the parameters, understand its limitations, and mainly pay attention to the J signals, you can extract a lot of value from this indicator even in volatile markets.