KDJ Indicator – What is it and how to use it?

Whether you trade forex or stake your interest in the stock market, It is pertinent to make appropriate trading decisions to remain profitable. Besides a good trading platform, a set of valuable indicators are crucial for your success. Undoubtedly, indicators help you read a trading chart and understand if the market ranges or follows a trend. Technical indicators also assist clients in identifying when an asset is overbought, oversold or due for a reversal. In this piece, we discuss one of the popular technical indicators (KDJ) indicator in detail. 

What Is KDJ Indicator?

KDJ is a technical indicator that helps traders to forecast stock trends and changes in their price patterns. It is sometimes also referred to as a random index. Mostly, traders use it to perform short term trend analysis. Besides assisting you to identify trend direction, it also helps you find optimal entry points. 

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Besides comprising three lines K, D, and J, the KDJ indicator has two price levels: the highest and the lowest. For period calculation, the indicator incorporates both price levels besides accounting for the amplitude of fluctuations in the prices. Hence the indicator is believed to reflect price fluctuations reasonably well. In the KDJ index, the fastest index is K in yellow, the slowest is D in blue, and J is the medium index with a red line.

KDJ index values range between 0-100 for K and D, while the value for J can be less than 0 or more than 100. However, the software incorporates KDJ values between 0 and 100 for research and analysis. 

The value for J is more sensitive than K, with D being the least sensitive. On the other hand, D possesses more stability while K and J values rank at 1 and 2, indicating the latter being less stable.  

With the KDJ indicator, investors mainly try to understand the relationship between an underlying asset’s highest, lowest, and closing prices. It also employs some merits of strength indicator, momentum concept, and the moving average. Therefore, it becomes pretty easy to judge the market conditions using the KDJ indicator. 

How Does It Work? 

KDJ indicator is all about identifying random price fluctuations and works best for short and medium-term analysis in a trending market. However, the K-line chart also predicts the price trend pretty well in a more extended time frame. For instance, on the weekly chart, the KDJ indicator’s mid-line operation works much better. 

While the K and D lines look similar to the lines used in the Stochastic Oscillator, the J-line reflects the bifurcation of the D’s value from K. When these lines converge, you can anticipate a new trading opportunity. 

How to Setup the KDJ indicator?

The KDJ Indicator is a technical indicator that transforms historical data. With KDJ, traders can detect hidden patterns and peculiarities in price dynamics that a human eye could hardly see. Traders must adjust their strategy based on the information acquired from the KDJ indicator. 

Given below are the simple steps to help you set up the indicator. 

  1. Download the KDJ MT4/MT5 Indicator on your PC. You can easily find it over the internet. 
  2. After installing it, sign in to the MetaTrader platform and open the data folder by clicking on the file menu. 
  1. Access the MQL4 folder and paste it into the indicators folder. 
  1. Restart the Metatrader 4/5 Client.
  2. Choose a chart and timeframe to test the KDJ indicator.

How to trade using the KDJ indicator?

With KDJ indicators, traders mainly look for buy and sell signals. Based on the values of the KDJ indicator, there are three different zones, including oversold, overbought, and wandering zone. 

When the value of KDJ decreases below 20, they fall in an oversold area. Similarly, values exceeding 80 hit the overbought zone.

KDJ indicator generates a sell signal when the three lines intersect above an overbought level. In such a scenario, the blue line remains on top while the yellow line comes in the center, and the red one stays on the bottom. Similarly, a buy signal is received when all three lines coincide below an oversold level following the same sequence. 

Not to mention, when the values for the KDJ indicator hover between 20 and 80, you should wait for the confirmation signal. 

Levels being overbought and oversold indicate reversal points. While these levels have a default value of 80 and 20, you can tweak them for more sensitivity to get a fair indication. 

Things To Consider While Trading With KDJ Indicator 

It is best to use the KDJ indicator with other indicators, such as the Average True Range (ATR) and Average Directional Index (ADX).

The Average Directional Index (ADX) indicates a possible trend reversal. Since KDJ is less likely to work under extremely volatile markets, ATR can help you determine the market’s volatility with some reasonable assurance. 

Remember, indicators can only help you find a possible value and don’t offer 100 percent confirmation. Therefore, it is crucial to employ an appropriate capital injection followed by advanced risk management tools. 

Pros and Cons of KDJ Indicator 

Like other indicators, KDJ also has some pros and cons that are listed below. 


  1. KDJ indicator is simple to understand and easy to interpret
  2. It works best when used with other indicators, such as Stochastic Oscillators.
  3. It is ideal for identifying changes in price trends and finding optimal entry points.


  1. KDJ indicator doesn’t work in a highly volatile market. 
  2. It sometimes offers misleading information.


Undoubtedly, the KDJ indicator is pretty helpful to determine price trends and identify entry points. However, the indicator can sometimes lead to false information like other technical indicators; hence shouldn’t be relied upon in absolute terms. It is better to use it with other technical indicators to form a more reasonable trading decision. 

Download Link: https://www.mql5.com/en/code/9173