Is the second golden cross of the KDJ indicator below the 0 axis more reliable?

A second KDJ golden cross below the 0 axis may signal bullish reversal in crypto, but requires volume, divergence, and trend confirmation for reliability.

Jul 26, 2025 at 10:07 am

Understanding the KDJ Indicator in Cryptocurrency Trading

The KDJ indicator is a momentum oscillator widely used in cryptocurrency technical analysis to identify potential buy and sell signals. It comprises three lines: the %K line (fast), the %D line (slow), and the %J line (divergence). These lines are derived from price data over a specified period, typically 9 days, and are used to assess overbought or oversold conditions. The %K line reflects the current closing price relative to the high-low range, while the %D line is a moving average of %K, and the %J line represents the divergence between them. Traders often watch for crossovers between the %K and %D lines as key signals.

In crypto markets, where volatility is high and trends can reverse rapidly, the KDJ helps traders time entries and exits. When the %K line crosses above the %D line, it's known as a "golden cross" and is considered a bullish signal. Conversely, a "death cross" occurs when %K crosses below %D, indicating bearish momentum. However, the reliability of these signals depends heavily on their position relative to key threshold levels, particularly the 0 axis, which is not a standard boundary in KDJ but may be interpreted as a psychological or contextual reference point in certain modified versions or overlays.

What Does the 0 Axis Represent in KDJ Context?

While the traditional KDJ indicator operates within a 0 to 100 range, the 0 axis is not a standard reference line like the 20 or 80 levels that mark oversold and overbought zones. However, in some trading platforms or custom configurations, the KDJ may be shifted or interpreted in relation to a zero baseline, especially when combined with other indicators or when normalized. In such contexts, values below the 0 axis may imply extreme bearish momentum or a prolonged downtrend.

When both the %K and %D lines are below 0, it suggests that the asset has been under consistent selling pressure. A golden cross occurring in this region could signal a potential reversal from extreme pessimism. The idea is that after prolonged downward movement, a crossover might reflect renewed buying interest. However, this interpretation depends on the specific charting tool and settings used, as not all platforms display or calculate KDJ with a zero baseline.

Conditions for a Second Golden Cross Below the 0 Axis

A second golden cross refers to a situation where the %K line crosses above the %D line, then pulls back without pushing into positive territory, and subsequently forms another bullish crossover. This pattern may suggest strengthening momentum after a failed initial recovery attempt. For this to occur below the 0 axis, the following conditions must be met:

• The %K and %D lines must both remain below the 0 level throughout the formation.
• The first golden cross happens, but price fails to rise significantly.
• The %K line dips back down, approaching or slightly crossing below %D again.
• A second upward crossover of %K over %D takes place, still under the 0 axis.

This scenario is often interpreted as a confirmation of accumulating bullish pressure despite ongoing bearish market sentiment. In cryptocurrency trading, where sentiment shifts rapidly, such a pattern might precede a breakout if accompanied by increasing volume or positive news.

Assessing Reliability of the Second Golden Cross

The reliability of a second golden cross below the 0 axis hinges on several factors:

• Market context: In a strong downtrend, even repeated crossovers may fail if broader momentum remains negative. Confirming the signal with price action analysis—such as support level holds or bullish candlestick patterns—is essential.
• Volume confirmation: A rising trading volume during the second crossover increases the likelihood that the move is supported by real buying interest rather than short-term noise.
• Divergence detection: If the price makes a lower low while the KDJ forms a higher low, this bullish divergence strengthens the validity of the second golden cross.
• Timeframe alignment: The signal on a daily chart carries more weight than on a 15-minute chart. Traders should check higher timeframes to ensure the crossover aligns with larger trend structures.

It's important to note that no single indicator guarantees success. The second golden cross below 0 should not be acted upon in isolation. Combining it with tools like moving averages, RSI, or MACD improves accuracy. For instance, if the 50-day moving average begins to flatten and the RSI exits oversold territory, the KDJ signal gains credibility.

Step-by-Step Guide to Identifying and Validating the Signal

To properly identify and validate a second golden cross below the 0 axis on a cryptocurrency chart, follow these steps:

• Open a cryptocurrency trading platform such as TradingView or Binance and load the price chart of the asset (e.g., BTC/USDT).
• Apply the KDJ indicator from the studies menu, ensuring the default settings (9,3,3) are used unless a specific strategy requires adjustment.
• Observe the K, D, and J lines and locate instances where both K and D are below the 0 level.
• Identify the first instance where the %K line crosses above the %D line while below 0—this is the first golden cross.
• Watch for a retracement where %K dips back toward or below %D without the lines rising above 0.
• Confirm the second crossover where %K again moves above %D, still under the 0 axis.
• Check for bullish divergence by comparing recent price lows with KDJ lows.
• Analyze volume bars to see if there's an increase during the second crossover.
• Overlay a 200-period moving average or use trendlines to assess the broader trend direction.
• Wait for a candle close above a recent swing high or a breakout from a descending trendline to confirm price reaction.

This process ensures that the signal is not just a random fluctuation but part of a developing reversal pattern.

Common Misinterpretations and Pitfalls

Traders often misinterpret the KDJ signals due to incorrect settings or lack of context. One common error is assuming that any golden cross below 0 is automatically strong, without verifying volume or price structure. Another issue arises when the 0 axis is misread—some platforms do not display KDJ with a zero baseline, leading to confusion. Always verify the indicator’s scale and range.

Additionally, choppy or sideways markets can generate multiple false crossovers. In such environments, the KDJ oscillates rapidly, producing signals that lack follow-through. Filtering these with ADX (Average Directional Index) can help determine whether the market has enough trend strength to trust the crossover.

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Frequently Asked Questions

Can the KDJ indicator be used on all cryptocurrency timeframes?

Yes, the KDJ can be applied to any timeframe, from 1-minute to weekly charts. However, signals on lower timeframes (e.g., 5-minute) are more prone to noise and false crossovers. Higher timeframes like daily or 4-hour provide more reliable readings, especially for swing or position traders.

How do I adjust the KDJ settings for better accuracy in crypto markets?

The default (9,3,3) settings work well for most scenarios. For faster signals, reduce the period to (6,3,3); for smoother, less frequent signals, increase to (14,3,3). Always backtest changes on historical data before live trading.

Does a second golden cross below 0 always lead to a price increase?

No, it does not guarantee a price rise. It indicates potential bullish momentum, but confirmation from price action, volume, and other indicators is necessary. In strong downtrends, even repeated crossovers may fail.

Is the 0 axis standard in all KDJ implementations?

No, the standard KDJ operates between 0 and 100. The 0 axis as a reference point is not universal and may appear only in customized versions or when the indicator is shifted. Always check the scale on your charting platform.