Study on Alligator Indicator

Based on the study of historical market data, mostly price and volume of the stocks, technical analysts do analysis. Technical analysis is a safety analysis method for predicting the stock prices and the market trend. The expert advisory firms like TradeNexa use this technical analysis to generate accurate Stock Cash Tips.

This article will put in the picture of Alligator indicator, which is used by technical analysts to signal absence, formation and direction of the stock market. The name given to this technical indicator was because of the similar behavior observed by him in the market trend and the alligator. He observed that the alligator wakes up so that it can feed and get back to sleep again. Similarly, in the market, it is observed that most of the time it remains constant only for a few times it generates trends. There is one more saying about the alligator that more it sleeps the hungrier it gets. In concern with this fact, for more time the market is constant, stronger the market move will be.

How to use Alligator Indicator?
The alligator indicator consists of three periods smoothed moving averages that are moved into the future three respective bars. The three periods considered are 13, 8 and 5 whose smoothed moving average is further moved to bars of 8, 5 and 3 respectively. The colors of these bars are blue, red and green showing the jaw, teeth and lips of the alligator correspondingly.

While gazing the indicator, the technical analysts observes that the alligator is resting when they find the three averages are twisted collectively in a tapered range. It is observed that when the distance between the averages grows to be more then the probability of change in the price of stocks are more.

As shown in the figure above, the averages continue to go in upward direction, which is interpreted by the technical analysts as signal to buy the stocks. In the illustration, it is shown by the green color line followed by red and blue. 

The third and last portion of the chart shows that while the slope is moving down then the averages are reversed in order. The blue color average is followed by the red and green averages, which shows the strong signals of selling. This is signal of downtrend and technical analysts consider selling the stocks and assets at occurrence of this point.

Example of Winning Trade in Alligator Indicator:

This is a chart of certain company that is showing swing trade after the Alligator has opened its mouth.

Example of losing Trade in Alligator Indicator:

This chart shows the wide trading range, which shows several signals of alligator.

The first point in the figure shows, the gap just before the alligator short signal is indicated by the three aligned moving averages. As the prices are filling the gap the technical analysts expect support at the same level. 

An outside bar stops the technical analysts. As shown in the figure above, the second point indicates, the bearish inside bar is reversal.

The third point in the figure indicates, fail Alligator trade that was predecessor to trading range. This shows Alligator signals were unreliable.

Thus, the alligator indicator can be utilized to generate accurate Stock Cash Tips.