Alligator

Introduction

Most of the time, the market remains stationary. However, there are periods where the market generates trends, and traders who are not located in the exchange itself profit from these trends. We call this type of market a blind chicken market. Our indicator helps us identify and capitalize on these trends.

Alligator Technical Indicator

The Alligator Technical Indicator is a combination of Balance Lines (Moving Averages) that use fractal geometry and nonlinear dynamics. It shows the interaction of different time periods. Clear trends are only present 15 to 30 per cent of the time, so it is important to follow them and avoid working on markets that fluctuate within certain price periods.

Understanding the Alligator

The Alligator has three components: the Jaw, the Teeth, and the Lips. When these components are closed or intertwined, it means the Alligator is going to sleep or is already asleep. As it sleeps, it becomes hungrier. The longer it sleeps, the hungrier it becomes. When the Alligator wakes up, it first opens its mouth and yawns. Then it starts hunting for food, which can be the flesh of a bull or a bear in the market. After eating enough to feel full, the Alligator loses interest in the food/price, indicated by the Balance Lines joining together. This is the time to fix the profit.

The Alligator sleeps while its lines are intertwined, wakes up when they fan out in a trend, and loses interest when they come together again. The shaded area shows how far the lines are shifted into the future.

Calculation of Alligator

The Alligator consists of three smoothed moving averages of the median price, each shifted a number of bars into the future:

MEDIAN PRICE = (HIGH + LOW) / 2
JAW = SMMA(MEDIAN PRICE, 13, 8)
TEETH = SMMA(MEDIAN PRICE, 8, 5)
LIPS = SMMA(MEDIAN PRICE, 5, 3)

Where:

SMMA(X, N, S) is the smoothed moving average of X with period N, shifted S bars forward;
JAW is the blue line, TEETH the red line and LIPS the green line.