KDJ Averages: Smoothing and Crossover Entry Signals

Summary

KDJ Averages is a smoothed oscillator built from the stochastic range value (RSV). It applies configurable moving-average methods to the K and D lines, then derives J from those lines. Compared with the standard KDJ, the default configuration makes J somewhat faster. The indicator has parameters for its lookback, smoothing periods and methods, and a threshold. The suggested reading uses J crossing the threshold as a setup: an upward cross prompts a search for selling opportunities, while a downward cross prompts a search for buying opportunities. It then waits for K and D to cross J, with the crossing direction determining the entry direction. The document gives calculation formulas and qualitative interpretation, but no backtest, performance evidence, or rules for risk controls. Signals therefore remain a proposed technique whose usefulness would need independent testing.

Key ideas

• KDJ Averages smooths RSV to produce K and D, then calculates J from them.
• The indicator allows the user to choose periods and moving-average methods for K and D.
• A J-line threshold crossing is presented as a setup for looking for a trade.
• The later crossing of J by K and D is proposed to indicate entry direction.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.