Technical Indicator Alligator is a combination of the Balance Lines ( Moving Averages ) using fractal geometry and nonlinear dynamics.
Description of Alligator Technical Indicator
The blue line (Alligator Jaw) is the Balance Line for the time period that was used to plot the graph (13-period smoothed moving average, shifted by 8 bars into the future);
The red line (Alligator’s teeth) is the Balance Line for a significant time period an order of magnitude lower (8-period smoothed moving average, shifted by 5 bars into the future);
The green line (Lips of the Alligator) is the Balance Line for a significant time period, which is lower by one more order (5-period smoothed moving average, shifted 3 bars into the future).
Lips, Teeth and Jaw Alligator show the interaction of different time periods. Since trends in the market can be identified only within 15-30 percent of the time, it is necessary to follow the trends and not work in markets that change only within certain price periods.
How to use Alligator Technical Indicator
When the Jaw, Teeth and Lips are closed or intertwined, the Alligator is going to sleep or is already asleep. When he sleeps, his hunger increases – the longer he sleeps, the more hungry he will be when he wakes up. When he wakes up, the first thing he does is open his mouth and start yawning. Then he begins to smell the food: the bull’s meat or the bear’s meat, and starts to hunt after him. When the Alligator thoroughly fits, he begins to lose interest in the food-price (the Balance Lines converge) – this is the time for fixing the profit.
MEDIAN PRICE – the median price;
HIGH – the maximum price of a bar;
LOW – the minimum price of a bar;
SMMA (A, B, C) is the smoothed moving average. Parameter A – smoothed data, B – smoothing period, C – shift to the future. For example, SMMA (MEDIAN PRICE, 5, 3) means that the smoothed sliding is taken from the median price, while the smoothing period is 5 bars, and the shift is 3;
ALLIGATORS JAW – Alligator jaws (blue line);
ALLIGATORS TEETH – Alligator teeth (red line);
ALLIGATORS LIPS – Lips of the Alligator (green line).