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§5.8 Alligator indicator

It is one of the most poetic indicators; however, it is based on the same clearly defined principles as other indicators. To put it simply, the Alligator indicator is a set of three moving averages of various rates. As a rule, these wavy lines go in parallel with each other but they can intersect.

The author of the indicator called the first line “the jaws”, the second line “the lips”, and the third line “the teeth” of the alligator.

The alligator’s jaws represent a smoothed line on the chart which is shifted into the future (to the right). The moving averages’ rule is applicable here: if a price line crosses the “jaws” above then it is an uptrend.

The most important thing about this indicator is

The most important thing about this indicator is an intersection of lines. According to the author of the indicator, when these lines intersect each other then it indicates that the alligator “sleeps”. When he “awakes” the lines go different ways and his jaws open up. This is when a price will follow the trend.The longer the alligator sleeps the hungrier he becomes. In terms of the market it means that the longer the market is stagnant the more potential there is for a movement in the price and the more eagerly market participants desire to move the market in one way or another. Therefore, if you can see the “awakening alligator” on the chart, it would indicate that this is the time to make your trade. Of course, this also depends on whether other indicators don’t contradict the signals that you have received from the alligator indicator. Like any other indicator, the Alligator needs to be substantiated by other market signals. If you keep this in mind then you are more likely to win. As a whole, this indicator yields good profitability. It is also good for beginners because it allows you to indentify every trend on the market clearly.

§5.9 RAVI indicator→