For the traders who realize money management, the tools they use to decide on buying- selling are very critical. Traders who are interested in the technical analysis method find themselves in the vast sea of indicators while trying to create successful buy- sell signals. Among the indicators that get the most attention in the Forex market are the Bill Williams indicators. I will draw attention to the Alligator indicator which is one of the indicators of Bill Williams who is famous for his Chaos Theory.
To reach the Alligator indicator, you can follow respectively the Toolbar- Add- Indicators and Bill Williams tabs.
While uploading the indicator to the platform, you can go out of the template in the Parameters / Colors / Display sections and make it a fit for the financial asset you are interested in. To mention the areas in it as a standard in a word, the color blue in the related indicator represents the alligator’s jaw, the color red represents the teeth and the color green represents the lips. Alligator’s jaw, teeth, and lip are calculated through the 13, 8, and 5-period Smoothed Moving Average in the current formulation, and the prices predicated on the current averages are formalized with the predicated median price.
After the theoretical information and the issues that appear in the formula, we can now add the Alligator indicator in our platform and tell you how it must be interpreted.
While interpreting the alligator indicator, the matter to take into consideration is in which side of the indicator lines the spot price moves.
The Requirement / Interpretation of the Market Expectation Being Positive
For a positive expectation about the related financial asset to occur, the Alligator indicator lines need to be below the spot price.
The Requirement / Interpretation of the Market Expectation Being Negative
For a negative expectation about the related financial asset to occur, the Alligator indicator lines need to be above the spot price.
The Requirement / Interpretation of the Market Expectation Being Indecisive
If the related financial asset is in the process of making a decision about a horizontal pricing behavior, the spot price needs to move within the Alligator indicator lines.
The graphic we shared above is the practical version of the theoretical explanations we share on how to interpret the Alligator indicator.
As you can see in the graphic, we see that the indicator works successfully when there is an increasing or decreasing trend. When the market shows an uncertain pricing behavior, meaning there is a horizontal outlook, we see that the indicator is successful in finding its direction. Therefore, if the prices are horizontal while deciding to buy or sell, the success rate of the indicators will decrease. In these cases, you can wait for the market to create a trend outlook. The alligator indicator is critical for the answer to the question of which trend outlook might occur.