KDJ & RSI

The KDJ & RSI indicator combines the KDJ stochastic oscillator with a modified Relative Strength Index (RSI) to provide comprehensive momentum and trend exhaustion signals in a single view.

Usage

The indicator can be used to identify potential trend reversals and overextended market conditions through the interaction of its components:

• KDJ Signals: Traders typically look for the J line (red) to cross the KD average (blue). A bullish signal occurs when the J line crosses above the KD average from below, while a bearish signal occurs when the J line crosses below the KD average from above.
• RSI Overbought/Oversold: The RSI component is scaled to highlight extreme volatility. When the RSI circles reach above 70, the market is considered overbought. Conversely, when the RSI circles drop below -10, the market is considered oversold.
• Combined Analysis: Using both tools together allows for confirmation; for instance, a KDJ bullish cross occurring while the RSI is in an oversold zone can provide a higher conviction entry signal.

Details

The script calculates the standard K, D, and J components of the KDJ indicator. The J line is derived as $3 * K - 2 * D$, which makes it more sensitive to price movements than the standard stochastic lines. The KD average plotted is the mean of the smoothed K and D values.

The RSI component is mathematically transformed to align with the KDJ's scale, using the formula $(RSI - 35) * 2$. This centering and scaling allow the RSI to oscillate within a range that is visually comparable to the KDJ lines, while still maintaining its traditional momentum-tracking properties.

Settings

• Period: Sets the lookback period for the KDJ calculation (highest high and lowest low).
• Signal: Determines the smoothing factor used for the K and D lines.
• RSI Length: Adjusts the period used for the Relative Strength Index calculation.

FAQ

How do I interpret the colored RSI circles?

The RSI circles change to a solid color when reaching the overbought (70) or oversold (-10) thresholds to alert the user of potential exhaustion, otherwise, they remain semi-transparent.

What is the J line?

The J line is a component of the KDJ indicator that represents the divergence of the %K from the %D. It is the fastest-moving line and is often used to spot early turns in price action.

How can I access KDJ & RSI?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.