$ETH

Hello everyone! Today, we're not going to discuss those complex theories. Instead, let's focus on a very practical "KDJ Indicator" in cryptocurrency trading—simply put, this tool helps us determine when to buy and when to sell, acting as a "market compass." Whether you're a beginner just starting out or a seasoned veteran, understanding how to use it can help you avoid many detours and reduce losses!

First, let me ask: have you ever experienced this? Seeing the price of a coin keep rising, unable to resist chasing in, only to see it fall right after you buy; or watching the price plummet, panicking and selling, only for it to rebound immediately after? It’s not bad luck; mainly, you haven't grasped the market's "temperament"—and the KDJ indicator is a great tool to help you understand that temperament.

First, we need to understand what exactly the KDJ is. It consists of three lines, which are easy to remember:

- The K line is the "impulsive type," reacts quickly, moves first at the slightest market change, and is designed to catch short-term signals of price increases or decreases;

- The D line is the "steady type," very stable, filters out market noise, and helps us see medium- and long-term trends;

- The J line is the "warning signal," the most volatile, can tell us in advance when the price might change direction, but it can sometimes "freak out," so it’s best to look at it together with the K and D lines for reliability.

How do we use these three lines? The core involves four key points, explained in plain language:

1. **Overbought and Oversold**: The KDJ indicator has a range from 0 to 100, like a "market sentiment thermometer." When the K value exceeds 80, it indicates the market is "crazy hot," everyone is rushing to buy, and the price is likely to pull back. Don’t chase high; consider reducing positions or staying on the sidelines. When the D value drops below 20, it shows the market is "cold," no one wants to buy, and the price might bottom out and rebound. Pay attention, look for low-entry opportunities, but don’t rush—there might be more downside.

2. **Golden Cross and Death Cross**: These are the most direct buy and sell signals. A golden cross occurs when the K line crosses above the D line, especially when both are below 20—that’s a "buy signal," meaning the market is saying "time to buy cheap." A death cross is when the K line crosses below the D line, especially when both are above 80—that’s a "sell signal," meaning "take profits and don’t be greedy." Be cautious: if the cross occurs in the middle range, the signal is less reliable and should be confirmed with other factors.

3. **Divergence**: This is key for predicting reversals. What is divergence? For example, if the price hits a new high but the KDJ doesn’t follow suit, it’s called a "top divergence," indicating the upward momentum is weakening and a decline may follow. Conversely, if the price hits a new low but the KDJ doesn’t, it’s a "bottom divergence," suggesting the downward trend is losing strength and a rebound could happen. This signal is more reliable than just the golden or death cross, especially on daily charts, so pay close attention.

4. **J Line Alerts**: When the J line exceeds 100, it’s signaling "overbought, a correction may be coming"; when it drops below 0, it’s "oversold, a rebound might occur." The steeper the J line rises, the stronger the trend; the steeper it falls, the more intense the decline. It helps us gauge trend strength.

But knowing these isn’t enough. When applying the indicator, we also need strategies to avoid pitfalls:

- First, choose the right timeframe. For short-term trading, look at 15-minute or 1-hour charts, where KDJ reacts quickly to catch short-term swings. For medium-term investing, focus on daily or weekly charts, observing how KDJ behaves in the middle range for more stable trends. For long-term holding, adjust parameters to be more stable, such as (21,7,7), and pay attention to how long the J line stays in extreme zones.

- Second, multi-timeframe resonance. What does that mean? For example, if a golden cross appears on the 4-hour chart and a bottom divergence on the daily chart, the combined signals greatly increase confidence in entering the market. But don’t rely solely on small timeframe signals—they can be noisy. Always consider the overall trend on larger timeframes.

Another key point: don’t use KDJ alone! It’s like a "scout" that works best when combined with other "comrades." For example, pair it with MACD—one for short-term fluctuations, the other for medium- and long-term trends; or combine it with volume. When KDJ signals appear, if volume is increasing, the signal is more reliable; if volume is low, it might be a false alarm.

Now, a few pitfalls to watch out for, as many traders fall into these traps:

1. **Indicator Lag**: KDJ is calculated based on past prices, so it lags behind the actual price movement. Sometimes, the indicator shows a buy signal after the price has already risen. Don’t rely solely on the indicator; always consider current market conditions.

2. **Failure in Extreme Markets**: During sharp rises or falls, KDJ can stay in overbought or oversold zones for a long time. Don’t go against the trend—if it’s overbought, don’t keep trying to sell; the price can keep rising. Follow the trend.

3. **Small-Cap Coin Traps**: Some small tokens are easily manipulated by big players. KDJ signals might look good, like a golden cross, but could be false signals caused by whales. Check order books and depth charts to avoid being fooled.

4. **Psychological Bias**: When KDJ signals appear, don’t let greed or fear cloud your judgment. Set stop-loss and take-profit levels; don’t hope for "a little more rise" or "a little more fall." Many losses happen because traders are too greedy or panicked.

Finally, here are some practical tips to remember:

- Overbought above 80, consider reducing positions; oversold below 20, watch for potential rebounds.
- Buy on low-position golden crosses; sell on high-position death crosses; don’t rush in the middle.
- Watch for divergence signals: top divergence to sell, bottom divergence to buy.
- Multi-timeframe resonance increases success rate; combine multiple indicators to avoid pitfalls.
- Keep your position size reasonable, set proper stop-losses, and trade rationally.

Actually, KDJ isn’t hard to understand. Its core purpose is to help us judge market heat and trend changes. You don’t need to memorize complex formulas—just remember "observe ranges, watch crossovers, look for divergence, and combine signals." The more you observe and verify, the more intuitive it becomes.

Lastly, a reminder: the cryptocurrency market is highly volatile. No indicator can be 100% accurate. KDJ is just an auxiliary tool and cannot replace independent thinking. Always manage your risks, don’t invest all your assets at once, stay calm, and make rational decisions to succeed in the market.

Hope today’s sharing helps everyone. Wishing you smooth trading and more profits! Thank you all!