The core principle of the basic application of stochastic indicators: choose different stochastic indicators according to different market rhythms. When the market fluctuates rapidly, use common KDJ indicators. Choose the SKDJ indicator when the market is running flat.
- The application rule of stochastic KDJ
- The K value and D value are always between 0 and 100. When the D value is above 70, the market is overbought. When the D value is below 30, the market is oversold.
- When the K value is greater than the D value, it shows that the current trend is upward, so when the K line breaks through the D line, it is a buy signal. When the value of D is greater than the value of K, the display trend is down. Therefore, the K line fell below the D line, which is a sell signal.
- KD indicator can not only reflect the degree of overbought and oversold in the market, but also send out buying and selling signals through cross-breaking. But if this kind of cross-breaking occurs around 50 and the trend falls into the market again, the buying and selling signals can be regarded as invalid. The intersection of K line and D line occurs above 70, and the effective force is below 30.
If the KD golden cross occurs below 20, it is the best buying point. If the KD dead fork occurs above 80, it is the best selling point.
- The KD indicator is not suitable for stocks with small issuance and inactive trading, but the KD indicator has extremely high accuracy for the large and popular markets.
- When the stochastic index deviates from the stock price, it is generally a signal of a turning trend, and the mid-term and short-term trends may bottom or peak.
- When the K value and D value rise or fall, the speed decreases. The slope tends to be flat, which is an early warning signal of a short-term turnaround.
Second, the application rule of stochastic KDJ
- When the K value is higher than the 80 overbought zone, the short-term stock price is likely to fall back, and when the K value is lower than the 20 oversold zone, the short-term stock price is likely to rebound upward.
- The K value is around 20, and when it crosses the D value from the right direction of the D value, it is a short-term buy signal.
- The K value is around 80, and when it crosses the D value from the right direction of the D value, it is a short-term sell signal.
- When the J value is greater than 100, the stock price is likely to form a short-term head; when the J value is less than 0, the stock price is likely to form a short-term bottom.
- Any signal whose KDJ fluctuates around 50 has little effect.
- Deviation phenomenon: the price of new highs or new lows, but KD does not have this phenomenon, is also an important precursor to the reversal. This includes the top deviation from the bottom deviation.
- The K value forms a phenomenon that the bottom is higher than the bottom, and it will be at a low level of about 20. When the D value crosses twice from bottom to top, the stock price will rise more.
- The K value forms a phenomenon that the top is lower than the top, and at a high level of about 20, the stock price will fall more when it crosses the D value twice from top to bottom.
- The J value has crossed the zero axis three consecutive times in a short period of time, which will be an important buying signal. J value falling below the 100 line three times in a short period will be an important selling signal.
Three, the application rules of slow stochastic indicators
- Like normal stochastic indicators, K-line and D-line are randomly generated at a slow speed. There are overbought and oversold areas at a slow speed, 80 is an overbought area, and 20 is an oversold area. When the index is greater than 80, the probability of back gear is high, and when the index is less than 20, the probability of rebound is high.
- When K value crosses D value upwards at around 20, it is a buy signal.
- When the K value crosses the D value down at around 80, it is a sell signal.
- The signal whose SKDJ fluctuates around 50 has little effect.
- SKDJ is more suitable for short-term, because it is not prone to jitter noise, the trading point is called KD clear. When the K value of the SKDJ line deviates from the index at the low end, it should be used as a buying point, especially when the K value exceeds the D value for the second time.