KDJ Indicator MT4 | MT5

The KDJ Indicator is a momentum-based oscillator developed as an enhanced version of the well-known Stochastic Oscillator, incorporating an extra J-line, which represents the divergence of the %K and %D lines. 

This indicator displays these three lines:

1. K-line (blue): Fast moving average; K = (KFactor * PrevK) + (DFactor * RSV) Where RSV = 100 * [(Close - Lowest Low) / (Highest High - Lowest Low)]
2. D-line (green): Slow moving average; D = (KFactor * PrevD) + (DFactor * K)
3. J-line (red): Reflects momentum and divergence; J = 3D - 2K  

Additionally, the KDJ's lines are used in various trading strategies, such as:

• Overbought and Oversold levels:

* A reading above the 80-value signals an overbought market condition and a potential selling opportunity.

* A reading below the 20-value signals an oversold market condition and a potential buying opportunity. 

• Crossover:

- When the K-line crosses above the D-line, it signals a long opportunity.

- When the Blue-line crosses below the Green-line, it signals a short opportunity.

• J-line reversals:

* When the Red-line moves away from the other two lines, it signals strong momentum, if they oscillate between 20 and 80 levels, and a reversal soon, if they remain in the oversold or overbought zones.

This indicator is popular for short-term trading, particularly in scalping and swing trading strategies. It is often combined with other technical tools like MAs and support & resistance levels for better accuracy.

1. In the USDCHF example on the MT4 chart, when the K-line crosses above the D-line and the J-line moves away from them, that signals a strong buy opportunity. When the three lines come closer, it suggests a consolidation phase and the trader should wait for a confirmation to enter the market. When the blue line re-crosses above the green line alongside the red line moves away again, providing a buying opportunity. Conversely, when the green crosses above the blue line, signaling a selling opportunity.   

2. In the EURGBP example on the MT5 chart, the K-line moves above the D-line, signaling the beginning of the uptrend. When the three lines reach the overbought zone (above 80-value), suggesting a potential bearish reversal. As the green line breaks above the blue one, the red line on the other hand moves away from them, signaling the start of the bearish movement. 

3. In the NZDJPY example on the MT4 chart, the K-line drops below the D-line, signaling a bearish momentum. When the three lines reach the oversold zone (below 20-value), suggesting a potential bullish reversal. As the blue line rises above the green one, the red line confirms the strong momentum when moves away, signaling the beginning of the uptrend.