Forex Focus: The Alligator Indicator by Alexander Sabodin Here’s a trading system you can apply to trending markets such as the currencies. There is a moving average–based trading system that I have found works best in trending markets, with its main instrument the alligator indicator. The alligator was first described by Bill Williams in his book New Trading Dimensions. Some software packages include the alligator indicator, but if it’s not available, all you have to do is take three smoothed moving averages using 13, eight, and five periods and shift them by eight, five, and three bars into the future. The longest period line is blue (the alligator’s jaw), the middle one is red (the alligator’s teeth), and the shortest one is green (the alligator’s lips). According to Williams, when these three moving averages are twisted together, it means the alligator indicator rests, and so we also rest. But the longer the alligator sleeps, the hungrier it is. So when the alligator awakes after a good, long rest it is very hungry to hunt for food. And its food is price. |
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