Scribd
Upload
185 views1 page

Page 0008

The Alligator indicator identifies market trends using three moving averages represented as the jaw (blue line), teeth (red line), and lips (green line) of an alligator's mouth. It lags the price as it is based on moving averages. When the lines are close together it indicates the market is consolidating before a potential breakout. The indicator suggests following the direction of the lines, with the blue jaw line leading in trends.

Uploaded by

Masna Srikanth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
185 views1 page

Page 0008

The Alligator indicator identifies market trends using three moving averages represented as the jaw (blue line), teeth (red line), and lips (green line) of an alligator's mouth. It lags the price as it is based on moving averages. When the lines are close together it indicates the market is consolidating before a potential breakout. The indicator suggests following the direction of the lines, with the blue jaw line leading in trends.

Uploaded by

Masna Srikanth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

The Alligator Indicator

The markets are Non Parametric and Random and generate trends on
an average of 20%-30%. Most of the money is made by following price
trends. There are many trading systems developed for Identifying market
trends and Alligator Indicator is one of them. It is a unique trading system
using moving averages and was developed by Bill Williams in 1995.

Since Alligator indicator is developed using moving averages It is a


lagging indicator used to identify price trends. The Alligator system should
not be used alone for taking trading decisions but should be used with
Fractals, AO, AC or other momentum indicators. In this article I will explain Alligator Formula
the alligator Indicator.
The Alligator indicator's calculation formula sequence involves the following
The aim of the alligator Indicator is to identify the price trend by using a steps:
combination of three smoothed moving averages .The three moving averages
are in Blue, Red and Blue color (market in the image below). The blue line is 1. The Alligator’s Jaw, the “Blue” line, is a 13-period Smoothed
known as the “jaw” of the alligator, it is usually the line on the top in a Moving Average of Median line , moved into the future by 8 bars;
downtrend and vice versa for the uptrend. The red line is known as the “teeth” 2. The Alligator’s Teeth, the “Red” line, is an 8-period Smoothed
of the alligator because it is between the jaw and the lips of the alligator. Moving Average of Median line, moved by 5 bars into the future;
3. The Alligator’s Lips, the “Green” line, is a 5-period Smoothed
Lastly, we have the green line that represents the “lips” of the alligator, this
Moving Average of Median line, moved by 3 bars into the future.
line is at the top in the uptrend and at the bottom in the downtrend. The
Alligator indicator is metaphoric because it represents the mouth of an How to Calculate
alligator. Sleeping period will give a way to the hunting period. The longer it
sleeps the hungrier it become therefore a stronger momentum will be in the MEDIAN PRICE = (HIGH + LOW) / 2
markets. The concept is about consolidation and breakout , the longer the
alligator sleep, means the longer the market is consolidating and after a long ALLIGATORS JAW = SMMA (MEDIAN PRICE, 13, 8)
consolidation the breakout is usually bigger.
ALLIGATORS TEETH = SMMA (MEDIAN PRICE, 8, 5)
These three line for the Alligator’s mouth: green – lips; red – teeth; blue –
jaws ALLIGATORS LIPS = SMMA (MEDIAN PRICE, 5, 3)

SMMA (Smoothed Moving Average)

The first value for the Smoothed Moving Average is calculated as a


Simple Moving Average (SMA):

8 | ATMASPHERE APRIL 2014

You might also like