Honestly, many underestimate the KDJ indicator, but it is truly a powerful tool if you understand how to use it.

The essence is that KDJ consists of three lines that move differently. J fluctuates the most and is the most sensitive, then K, and D is the most stable. The indicator analyzes the relationship between the highest price, lowest price, and closing price, combining concepts of momentum and moving averages. For short-term and medium-term analysis, it is indeed one of the most common tools on the markets.

Now about practice. Many people set the KDJ parameter to 9 by default, but this creates too many false signals due to frequent fluctuations. I tried changing the parameters to 5, 19, or 25 depending on the stocks and timeframes, and the results are much better. It’s worth experimenting with these values.

The main rules for using KDJ are quite simple. When K and D cross upward, it’s a buy signal. When K drops below D, it’s a sell signal. Overbought zones start at 80, oversold at 20. But here’s the tricky part: when the price moves in one direction without fluctuations, the KDJ simply dulls and stops giving valid signals.

But there’s one trick many overlook. The J value often provides the most reliable signals, especially when it exceeds 100 or drops below 0 for several consecutive days. This isn’t a frequent signal, but when it appears, it can be trusted. Experienced traders specifically look for such J-value moments to find the best entry and exit points.

On the weekly chart, KDJ performs better for medium-term analysis. If J drops below 0 and closes above the K line, and the price is above the 60-week moving average, it’s a good buying opportunity. Conversely, if J rises above 100 and then turns down, closing below K, and the price is below the 60-week average, it’s better to prepare for a sale.

I have the impression that many simply ignore KDJ because they don’t understand it properly. But if you adjust the parameters and combine signals with other indicators, this tool really helps to understand short- and medium-term market dynamics.