KDJ Indicator

Description

The KDJ indicator is actually a derived form of the Stochastic with the only difference being an extra line called the J line.

The J line represents the divergence of the %D value from the %K. The value of J can go beyond [0, 100] for %K and %D lines on the chart.

Formula

%K = 100 * (Close-LowestLow[last n periods])/(HighestHigh[last n periods]-LowestLow[last n periods])

%D = MovingAverage(%K)

How it works

When the oscillator surpasses 80 it`s considered to be overbought. When it goes down 20 it`s considered to be oversold.

Buy signal when J goes under 0 when K and J are in oversold area.

Sell signal when J goes above 100 when K and J are in overbought area.