Let’s talk about KDJ, because many people use this indicator incorrectly and then complain that it doesn’t work. I noticed that most often people set KDJ with the standard parameters of 9 and then wonder why there are so many false signals. In reality, if you change the parameters, the indicator becomes much more useful.

The J line fluctuates the most, then K, and D is the most stable. This is important to understand, because each line has its own role. J provides the highest sensitivity, but it is also the least reliable. D, on the other hand, is slow but stable. When I trade, I pay attention to the fact that the range of K and D is from 0 to 100, while J can go beyond these limits, which makes it especially interesting for finding extreme points.

The main idea of KDJ is to study the relationship between the high, low, and closing price. This lets you quickly understand where the market is overbought or oversold. On shorter timeframes, KDJ works better, but when you move to weekly charts, the indicator gives good signals for medium-term trading.

Yes, here are some practical tips. When the weekly J rises from below zero and closes above the K line, it often indicates the start of an uptrend. But it’s especially reliable if the price is already above the 60-day moving average. In a falling market, on the other hand, I wait until J holds above zero before buying.

At the top of the market, when J exceeds 100 and starts to fall, you need to be careful. This often signals a possible reversal. But again, if the price is below the 60-day moving average, it’s a stronger sell signal. In a bullish market, I don’t rush to sell—I wait for J to drop and close below K.

The main problem with KDJ is when the market moves in one direction: the indicator loses its edge and gives false signals. This happens often, so many traders ignore it. But if you change the parameters from 9 to 5, 19, or 25, depending on which asset you’re trading, the results are significantly better.

There’s an interesting point about the J line. If it stays above 100 for three days in a row, the price often makes a short jump upward. If it falls below zero for three days in a row, it often heads downward. These signals occur rarely, but when they do, they’re very reliable. Many experienced investors specifically look for such J signals, because that’s the essence of KDJ.

General rules: if D is above 80 — overbought; below 0 — oversold. J above 100 — overbought; below 10 — oversold. The golden cross of KD (K crosses D upward) is a buy signal. The death cross (K falling below D) is a sell signal.

But remember: KDJ works best in sideways markets, when the price is oscillating. When a strong trend starts, the indicator often gives unprofitable signals. That’s why I always combine KDJ with other analysis tools and trend lines. On its own, it’s a powerful tool, but it’s not a cure-all.