How To Use The Random Index (KD Line) In The Stock Market?

1. Calculation method

Random index can be chosen as the basis of any day, for example, the five day KD line formula is:

K value =100 * [[C-L5] / (H5-L5)]

D value =100 * (H3/L3)

Formula: C is the last day closing price: L5 is the lowest price in the last five days.

H5 is the highest price in the last five days; H5 is the sum of the last three (C-L5) numbers.

L3 is the sum of the last three (H5-L5) numbers.

The numbers calculated are all 0 - 100, and the numbers are all drawn on the graph. Usually the K-line is represented by the solid line, while the D line is represented by the dotted line.

The above is the original calculation method, and there are also improved formulas.

The old K line is cancelled, the D line becomes K line, and the three day mean line takes the place of D line.

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2, application principles

The random index is the graphic relationship between%K and%D curves, which is used to analyze the price trend. This graphical relationship mainly reflects the overbought and oversold phenomenon of the field, the tendency of back trend and the mutual breakthroughs between%K and%D, which indicates the top and bottom process of the short term trend. The specific rules of application are as follows: two

(1) the judgement of overbought and oversold area%K value is above 80, and%D value is over 70 is the general standard of overbought.

The%K value is below 20, and the%D value is below 30, which is a general standard for oversold in time.

(2) the judgment of the back slip when the stock price trend is higher than the one peak, the peak of the random index is lower than the one peak.

(3)% K line crosses the%D line to break judgement. When%K value is greater than%D, it indicates that the current trend is a rising trend. Therefore, the% K line is a buy signal when the%D line is broken down from the bottom up. Conversely, when the%D value is greater than the%K value, it indicates that the current trend is falling down, so that the% K line falls from the%D line up and down, and it is the selling signal.

The crossover breakthroughs between% K line and%D line are more accurate than 80 or below 20. The difference between KD line and strong and weak index is that it can not only reflect the overbought or oversold level of the market, but also achieve the function of buying and selling signals through cross breakthroughs. However, when such a breakthrough occurs at about 50, and when the trend falls into the board again, the trading signals should be regarded as invalid.

(4) the judgement of K-line shape is a warning signal of short term turning trend when the percent K line inclination tends to be gentle, which is more accurate in the big hot stocks and indexes, while the accuracy is lower in the cold or small stocks.

(5) another random index also has some theoretical turning signals: the speed of the rise and fall of K line and D line is weakened, and buckling occurs, which usually indicates that the trend will be changed in a short period of time. The K line suddenly passes through the D line after rising or falling for a short period of time, indicating that the market trend will soon turn to: the K-line falls to zero and usually rebounds to 20 to 25.

At this point, the market should start to rebound.

If K line rises to 100, the situation is just the opposite.

3, evaluation

(1) the random index is a relatively short term, sensitive index, and the analysis is more comprehensive, but it is more complex than the strong and weak index.

(2) the typical index of random exponent is quite accurate. Look at the typical back area and pay attention to the D line.

(3) in use, there is often a J line index, that is, 3 multiplied by K value minus 2 times D value (3K-2D=J), its purpose is to find out the maximum degree of deviation between K value and D value, and find the bottom and head by leading KD value.

When%J exceeds 100, it is overbought and oversold at less than 10.