What is Alligator indicator, the instructions of Alligator and how to use the Alligator indicator, the calculation of Alligator and the Alligator indicator main parameters
"Most of the time the market remains stationary. Only for some 15–30% of time the market generates trends, and traders who are not located in the exchange itself derive most of their profits from the trends. My Grandfather used to repeat: "Even a blind chicken will find its corns, if it is always fed at the same time". We call the trade on the trend "a blind chicken market". It took us years, but we have produced an indicator, that lets us always keep our powder dry until we reach the blind chicken market"
In principle, Alligator Technical Indicator is a combination of Balance Lines (Moving Averages) that use fractal geometry and nonlinear dynamics.
The blue line (Alligator’s Jaw) is the Balance Line for the timeframe that was used to build the chart (13-period Smoothed Moving Average, moved into the future by 8 bars);
The red line (Alligator’s Teeth) is the Balance Line for the value timeframe of one level lower (8-period Smoothed Moving Average, moved by 5 bars into the future);
The green line (Alligator’s Lips) is the Balance Line for the value timeframe, one more level lower (5-period Smoothed Moving Average, moved by 3 bars into the future).
Lips, Teeth and Jaw of the Alligator show the interaction of different time periods. As clear trends can be seen only 15 to 30 per cent of the time, it is essential to follow them and refrain from working on markets that fluctuate only within certain price periods.
When the Jaw, the Teeth and the Lips are closed or intertwined, it means the Alligator is going to sleep or is asleep already. As it sleeps, it gets hungrier and hungrier — the longer it will sleep, the hungrier it will wake up. The first thing it does after it wakes up is to open its mouth and yawn. Then the smell of food comes to its nostrils: flesh of a bull or flesh of a bear, and the Alligator starts to hunt it. Having eaten enough to feel quite full, the Alligator starts to lose the interest to the food/price (Balance Lines join together) — this is the time to fix the profit.
If all three lines are intertwined, the Alligator is asleep and the market is range-bound. The longer it sleeps, the hungrier it gets. When it wakes up from a long sleep it chases the price much farther, therefore price movements are much stronger. When the Alligator is asleep, stay square. Once the Alligator wakes up, it opens its mouth (Balance lines diverge) and starts hunting. Having eaten enough, it goes to sleep again (Balance Lines converge), so it’s time to fix profits.
If the Alligator is not asleep, the market is either up-trending or down-trending:
- if the price is above the Alligator’s mouth then it’s an uptrend;
- if the price is below the Alligator’s mouth then it’s a downtrend.
The Alligator also helps to determine the character of the Elliot waves:
- if the price is outside the Alligator’s mouth the wave is impulsive;
- if the price is inside the Alligator’s mouth the wave is corrective.
- Jaw period: Blue line averaging period (Alligator’s Jaw), default is 13
- Jaw shift: Blue line shift relative to the chart, default is 8
- Teeth period: Red line averaging period (Alligator’s Teeth), default is 8
- Teeth shift: Red line shift relative to the chart, default is 5
- Lips period: Green line averaging period (Alligator’s Lips), default is 5
- Lips shift: Green line shift relative to the chart, default is 3
- MA method:
- Smoothed, (default option)
- Linear weighted
- Apply to: Applied price
- Median Price, (high+low)/2, (default option)
- Typical Price, (high+low+close)/3
- Weighted Close, (high+low+close+close)/4