KDJ Indicator Origin
The KDJ indicator first appeared in the form of the KD indicator, which was developed based on the Williams indicator.

However, the KD indicator is only used to judge the overbought and oversold phenomena of cryptocurrencies, while the KDJ indicator integrates the concept of moving average line speed, forming a more accurate basis for buy and sell signals.

In practical applications, the K line and D line are used in conjunction with the J line to form the KDJ indicator.

The advantages of the KDJ indicator are: it is very sensitive, suitable for short-term operations in the cryptocurrency market, and has a high accuracy in sideways and fluctuating markets. Its design integrates the highest price, lowest price, and closing price relationships of cryptocurrencies, while also considering the concepts of momentum, strength indicators, and moving averages, allowing for quick and intuitive market assessments. It is widely used for medium to short-term trend analysis in the cryptocurrency market and is a commonly used technical analysis tool in the futures and cryptocurrency markets.

Basic Explanation of KDJ Indicator
The KDJ indicator has three lines on the chart: K line, D line, and J line. The stochastic indicator KDJ takes into account the highest and lowest prices within the period in its calculations and considers the random amplitude of price fluctuations, thereby more accurately reflecting the volatility of cryptocurrency prices, with a clearer signal.

Meaning of the Three KDJ Curves
K line: Fast confirmation line, reflecting short-term fluctuations in cryptocurrency prices.
D line: Slow main line, reflecting mid-term price trends.
J line: Direction sensitive line, which can exceed the 0-100 range, reflecting extreme overbought and oversold situations.

Application of KDJ Indicator
The KDJ indicator is essentially a stochastic volatility indicator, which is relatively accurate for grasping short-term market trends in the cryptocurrency space. In longer period K line charts (such as weekly charts), the KDJ indicator also provides guidance for mid-line operations.

Value Range: The K value and D value range from 0-100, while the J value can exceed 100 or fall below 0, but analytical software usually limits the range of KDJ analysis to 0-100.
Sensitivity and Safety: The J value is the most sensitive and the least safe; the K value is next; the D value is the most stable.

Practical Application of KDJ Indicator
Concept of Overbought and Oversold
Overbought: The market's buying sentiment is overheated, subsequent buying power is weak, and cryptocurrency prices face downward pressure.
Oversold: The market has excessive selling, selling has exhausted, and prices may rebound.

Crossing of KDJ Curves
(1) Golden Cross
Class A Golden Cross: When the cryptocurrency price has undergone long-term consolidation at low levels, and the K, D, and J lines are all below the 50 line, if the J line and K line almost simultaneously break above the D line, it indicates that the crypto market is about to strengthen, and the downtrend is ending, which allows for medium to long-term positions.

Class B Golden Cross: After a period of price increase followed by consolidation, if the K, D, and J lines hover around the 50 line, and the J line and K line break above the D line again with increased trading volume, it indicates that the crypto market is in a strong position, and prices will continue to rise, allowing for further purchases or holding positions.

(2) Death Cross
Class A Death Cross: After a long period of significant price increase, if the J line and K line simultaneously break below the D line at a high level (above 80), it indicates that the crypto market will transition from strong to weak, and prices will fall sharply, requiring selling off most positions.
Class B Death Cross: After a price drop, if the rebound lacks momentum and moving averages form resistance, if the KDJ curve briefly rebounds to around the 80 line but fails to break through, and the J line and K line break below the D line again, it indicates that the crypto market will weaken again, and prices will continue to fall, requiring selling or waiting.

Application of KDJ Indicator Patterns
(1) Top Patterns
When the KDJ curve is at a high position above 50, if it forms top reversal patterns such as M tops or triple tops, it may indicate that the cryptocurrency price will transition from strong to weak, and a significant drop is imminent, requiring timely selling. If the price curve shows the same pattern simultaneously, it can further confirm the decline (refer to pattern theory).

(2) Bottom Patterns
When the KDJ curve is at a low position below 50, if it forms bottom reversal patterns such as W bottoms or triple bottoms, it may indicate that the cryptocurrency price will transition from weak to strong, and a rebound is imminent, allowing for small purchases at low prices. If the price curve shows the same pattern simultaneously, it can further confirm the increase (refer to pattern theory).

Note: The top patterns of the KDJ curve (such as M tops, triple tops) are more effective in practice than bottom patterns (such as W bottoms, triple bottoms).

(3) Trend Line Application
Breakthrough of Downtrend Resistance Line: After continuous price corrections, if the KDJ forms a downtrend resistance line, and if the price rebounds and KDJ breaks through this resistance line, it may trigger a rebound.

Breakdown of Uptrend Support Line: After a price increase, if the KDJ forms an uptrend support line, and if KDJ breaks down this support line at a high level, the price may correct.

Precautions
A small oscillation and consolidation of K line after KDJ 'golden cross' is the optimal pattern.
After KDJ 'golden cross', if the cryptocurrency price hits a recent new high, the success rate is higher.
When forming a golden cross, the D indicator line must be in an upward state; when forming a death cross, the D indicator line must be in a downward state.