KDJ oscillator defines when it is necessary to search for market entry conditions.
It has four inputs:
- Period - calculation period;
- KFactor - K line calculation ratio;
- DFactor - D line calculation ratio;
- Threshold - signal line.
Calculation:
K = KFactor * PrevK + DFactor * RSV
D = KFactor * PrevD + DFactor * K
J = 3.0*D - 2.0*K
where:
RSV = ((Close – Lowest Low) / (Highest high – Lowest low)) * 100
Lowest Low, Highest High - the lowest and highest prices within the Period interval
One of possible interpretations: J line crosses the Threshold level. Up - search the possibility for selling, down - search for the appropriate moment to buy.