KDJ Indicator is based on the Stochastic Oscillator with the addition of an extra line (J).
The J line corresponds to the divergence of the %D value from the %K. The value of J can exceed [0, 100] for %K and %D lines on the chart.
Its formula is:
%K = 100 * (Close – Lowest Low [last n periods]) / (Highest High [last n periods] – Lowest Low [last n periods])
%D = Moving Average (%K)
Originally used first used in futures markets analysis, KDJ can identify reversals, and overbought or oversold levels.
- When the oscillator is above 80, it`s overbought. When it moves below 20, it`s oversold.
- Buy when J goes below 0 when K and J are in oversold area.
- Sell when J goes above 100 when K and J are in overbought area.
- File: KDJ.mq4
- Size: 3 Kb