## Great Resources Logo # KDJ Indicator

KDJ indicator
It has been developed from stochastics but it includes one more extra line as 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.When the J is over 100 or under 0 it is one of the most bullish or bearish signs out there.  The J seems to be a lagging indicator, but it seems accurate for large swings.
The K line is the fastest and the j line is the slowest of the two lines.The investor needs to watch as the D line and the price of the issue begin to change and move into either the overbought (over the 80 line) or the oversold (under the 20 line) positions. The investor needs to consider selling the stock when the indicator moves above the 80 level. Conversely, the investor needs to consider buying an issue that is below the 20 line and is starting to move up with increased volume.
How to calculate (Formula)
%K = 100[(C – L5close)/(H5 – L5)]
C = the most recent closing price
L5 = the low of the five previous trading sessions
H5 = the highest price traded during the same 5 day period.
The formula for the more important %D line looks like this:
%D = 100 X (H3/L3)
Now calculate %J = 3 x D  – 2 x K
The above formula is for knowledge purpose as now a days the software’s do the all of calculation part so you don’t have to worry
much about it.Lets take a look from google chart for google company stock. 